Bank of Baroda, a leading public-sector bank in India, has increased its MCLR/lending rates by 0.05% for loans of various tenors. The bank announced that this change will be effective from 7 July 2018. To this end, the public-sector lender issued a statement saying it had increased its lending rates due to the rising cost of funds and increasing interest rates.
Thus, the revised lending rate for overnight, 1 month, 3 months, 6 months, and 1 year loan tenors will be raised by 0.05%, thus causing the interest rates for these tenors to touch 8%, 8.5%, 8.15%, 8.35%, and 8.50%, respectively. This rise in the bank’s lending rates will make availing retail loans such as home loans, auto/motor loans, and personal loans more expensive for customers.
Banks usually review their MCLRs on a monthly basis, and based on the prevailing market condition at the time of the review, banks take the decision to increase or decrease the MCLR. Bank of Baroda had also increased its lending rate by five basis points for all tenors last month.
The Reserve Bank of India had increased the repo rate by 0.25% to touch 6.25% in its bi-monthly monetary policy review, which was held on 7 June 2018. The central bank increased the repo rate for the first time in the past four years. The rate at which the Reserve Bank of India (RBI) lends funds to other private and public-sector banks is called the repo rate. Subsequent to the RBI increasing the repo rate, several other banks also increased the lending rates for various tenors.
Source: The Times of India, Bloomberg | Quint