Bank of Baroda hikes MCLR from 12 Feb; loan EMI burden to increase | Mint
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Business News/ Industry / Banking/  Bank of Baroda hikes MCLR from 12 Feb; loan EMI burden to increase
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Bank of Baroda hikes MCLR from 12 Feb; loan EMI burden to increase

This comes a day after the Reserve Bank of India delivered another rate hike, increasing repo rate by 25 basis points to 6.50 per cent

The new BoB rates will be effective from Sunday, 12 February, 2023.Premium
The new BoB rates will be effective from Sunday, 12 February, 2023.

Public sector lender Bank of Baroda on Thursday said it has approved the revision in marginal cost of funds-based lending rates by 5 basis points (bps) across MCLR tenors. The new rates will be effective from Sunday (12 February, 2023).

This comes a day after the Reserve Bank of India delivered another rate hike, increasing repo rate by 25 basis points to 6.50 per cent. 

The RBI has hiked rates in five consecutive policy reviews since May last year in order to curb inflation, which has led to an overall jump in the interest rates in the system.

The overnight MCLR rate has been revised upward by 5 bps to 7.90 per cent from 7.85 per cent earlier, while that of one month tenure has been hiked by 5 bps to 8.20 per cent from 8.15 per cent, the bank said in a regulatory filing.

The three-month MCLR has been raised to 8.30 per cent from 8.25 per cent earlier. Among others, the six-month MCLR stands revised to 8.40 per cent from 8.35 per, BoB said.

For one-year maturity, the bank said the new rate will be increased to 8.55 per cent against 8.50 per cent.

The rise in MCLR will impact corporate borrowers. Retail lending, which includes housing, personal credit and SMEs, is predominantly linked to external benchmarks such as policy repo rate.

If the interest rate on the loan rises, EMIs will also increase unless the bank reduces its mark-ups / margins on loans. As a result, borrowers will now have to shell out more to pay their EMIs for loans that are linked to MCLR.

For existing borrowers with their loans linked to MCLR, the hike will impact their EMIs when their loan reset date arrives.

This hike reflects the increase in cost of money as banks jack up term deposit rates to attract funds to meet credit demand.

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ABOUT THE AUTHOR
Meghna Sen
Business journalist tracking markets, companies, economy and crypto for Livemint. She has 6 years of experience with online and print publications. Email: meghnasen08@gmail.com
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Published: 09 Feb 2023, 05:38 PM IST
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