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Business News/ Industry / Banking/  Bank of Baroda to hike MCLR by up to 35 bps, effective 12 Jan
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Bank of Baroda to hike MCLR by up to 35 bps, effective 12 Jan

For one-year maturity, Bank of Baroda said the new rate will be increased to 8.50 per cent against 8.20 per cent

The new rates are effective from 12 January, BoB said in a regulatory filing.Premium
The new rates are effective from 12 January, BoB said in a regulatory filing.

State-owned Bank of Baroda (BoB) on Tuesday increased the marginal cost of funds-based lending rates (MCLR) by up to 35 basis points (bps) across tenors. This hike by the Mumbai-based public sector lender is steeper than compared to upto 30 bps upward revision made in December 2022.

The new rates are effective from 12 January, BoB said in a regulatory filing.

The overnight MCLR rate has been revised upward by 35 basis points to 7.85 per cent, while that of one month tenure has been hiked by 20 basis points to 8.15 per cent, the bank said.

The three-month MCLR has been raised to 8.25 per cent from 8.05 per cent in December. Among others, the six-month MCLR stands revised to 8.35 per cent from 8.15 per cent in December, BoB said.

For one-year maturity, it said the new rate will be increased to 8.50 per cent against 8.20 per cent.

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

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

India's banking sector remained resilient in 2021/22 and lenders may have to raise deposit rates more to meet a surge in credit demand, the Reserve Bank of India (RBI) said in a report in December last year.

The central bank has raised rates aggressively in 2022 to tame inflation. While banks have swiftly transmitted the hikes to their lending rates, deposit rates have been laggards for most.

"During 2021-22, as credit growth picked up and deposit growth moderated, the incremental credit-deposit (C-D) ratio reached a four-year high," the RBI had said in its report on Trends and Progress of Banking released on Tuesday.

Loans of Indian banks rose 17.5 per cent in the two weeks to 2 December from a year earlier, while deposits rose 9.9 per cent, the latest data from the RBI had showed.

The RBI's rate-setting Monetary Policy Committee has raised interest rates by a total of 225 bps over five meetings since May 2022.

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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: 10 Jan 2023, 04:31 PM IST
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