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With effect from today, one of the leading public sector lenders, Bank of India (BOI), increased the rate for repo-based loans by 35 bps. The effective Repo Based Lending Rate (RBLR) w.e.f 7th December is 9.10% as per the revised Repo rate of 6.25%. BOI has mentioned on its website that “The effective RBLR w.e.f 07.12.2022 is 9.10% as per the revised Repo rate (6.25%)."

The lending rate that is correlated to the repo rate of the RBI is known as the repo-linked lending rate or RLLR. Beginning on October 1, 2019, floating-rate retail loans approved by banks are linked to external benchmark lending rates (E-BLR), which had resulted in most of the banks adopting repo rate as their benchmark. Banks have their own Repo linked lending rate that fluctuates every time the Reserve Bank of India or RBI changes the repo rate. Since the central bank's Monetary Policy Committee, or MPC, evaluates the repo rate on a bi-monthly basis the RLLR rate of the BOI is in accordance with the RBI's 35 bps repo rate increase announced today in the policy meeting of December.

When a loan is made based on RLLR, the interest rate on the loan will fluctuate according to the repo rate. Let's examine this with an illustration. The RLLR of all banks, which adopts the repo rate as the external benchmark, will increase by 35 basis points since the RBI repo rate, which was 5.90% in September, is increased by 35 bps to 6.25% today. For RLLR-based loans, the interest rate will be correlated with the RLLR of BOI. The RLLR in response will be influenced by the repo rate set by the RBI. Banks' RLLR is affected if the RBI changes the repo rate.

Effective from 01.12.2022, MCLRs of BOI are also in force. The overnight MCLR is now at 7.30%, 1 month MCLR is 7.65%, 3 months MCLR is 7.70%, 6 months MCLR is 7.90%, 1 year MCLR is 8.15% and 3 years MCLR is 8.35%.

The shares of Bank of India Ltd closed today at 92.75 apiece, up by 2.71% from the previous close of 90.30. On a YTD basis, the stock has gained 76.16% so far in 2022.

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