Axis Bank hikes lending rates by 10 basis points: What this means for borrowers

Private lender Axis Bank has raised the marginal cost of funds-based lending rates by 10 basis points (bps) across MCLR tenors. The new rates came into effect from 19 February, 2023, according to the Axis Bank website.

The overnight MCLR rate has been revised upward by 10 bps to 8.70 per cent from 8.60 per cent earlier in January, while that of one month tenure has been raised by 10 bps to 8.70 per cent from 8.60 per cent, Axis Bank said.

The three-month MCLR has been hiked to 8.80 per cent from 8.70 per cent earlier. Among others, the six-month MCLR stands revised at 8.85 per cent from 8.75 per, the lender said.

For one-year maturity, the bank said the new rate will be increased to 8.90 per cent against 8.80 per cent.

For two and three years maturity, the rate has been hiked to 9.00 per cent and 9.05 per cent respectively, as against 8.90 per cent and 8.95 per cent.

What does this hike mean for borrowers?

The hike will make borrower's EMI or Equated Monthly Installment outgo expensive if the person is taking a loan against the MCLR. All types of loans including floating-rate home loans, personal loans, car loans, etc linked to the MCLR could get costlier. The interest on these loans will increase.

MCLR is the minimum rate at which a bank can provide loans to its customers, which means the 10 bps hike will make consumer, auto and home loans costlier for borrowers.

The hike comes days after the central bank announced a 25 bps repo rate hike to 6.5 per cent on 8 February, the highest since 2018, as it attempts to cool inflation closer to its target.

RBI’s monetary policy committee (MPC) kept the policy stance of “withdrawal of accommodation" unchanged. The decision was not unanimous, with four out of the six members of the MPC voting in favour of the rate hike. Ashima Goyal and Jayanth Varma voted against an increase.