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Business News/ News / India/  PNB hikes lending rates by 10 bps across tenors: EMIs to go up

PNB hikes lending rates by 10 bps across tenors: EMIs to go up

  • The public sector lender Punjab National Bank has hiked Marginal Cost Of Fund Based Lending Rates (MCLR) by 10 bps across tenors.

PNB today has hiked overnight MCLR by 10 bps from 7.90% to 8.00%, 1 month MCLR from 8.00% to 8.10%, 3 month MCLR from 8.10% to 8.20%, six month MCLR from 8.30% to 8.40%, 1 year MCLR from 8.40% to 8.50% and 3 years MCLR from 8.70% to 8.80%.

The public sector lender Punjab National Bank has hiked Marginal Cost Of Fund Based Lending Rates (MCLR) by 10 bps across tenors. The bank has issued this notification as of today, March 1, 2023. Beginning on April 1, 2016, the Reserve Bank of India (RBI) established the Marginal Cost of Funds based Lending Rate (MCLR) to establish lending rates for commercial banks. The lowest or minimum interest rate that a bank or lender can provide on particular loans, such as home loans, loans against property, auto loans, and so forth, is known as the MCLR (marginal cost of funds based lending rate).

PNB has mentioned on its website that “As per the guidelines by the RBI, banks have to prepare Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark lending rates. Based upon this MCLR, interest rate for different types of customers should be fixed in accordance with their riskiness."

PNB today has hiked overnight MCLR by 10 bps from 7.90% to 8.00%, 1 month MCLR from 8.00% to 8.10%, 3 month MCLR from 8.10% to 8.20%, six month MCLR from 8.30% to 8.40%, 1 year MCLR from 8.40% to 8.50% and 3 years MCLR from 8.70% to 8.80%.

PNB MCLR

Commenting on how MCLR hike affects borrowers, Parry Singh, Founder and CEO, Red Fort Capital, said “MCLR, or Marginal Cost of Funds Based Lending Rate, is the lowest rate that a bank can offer. When a bank increases MCLR, the interest rate on loans increases as it is mostly linked to MCLR. EMIs will increase unless the bank increases the loan tenure or reduces the markup over MCLR. For example, 50 basis point increase in MCLR can increase EMI burden by 1% - 5% for loans of 5 to 30 years respectively. Borrowers need to adjust monthly financial planning to pay high EMI. Borrowers are afraid to take new loans because of the increased financial burden, which reduces credit flow in the market".

Suman Bannerjee, CIO, Hedonova said “MCLR is the minimum rate at which a bank can give out a loan to its customers. Recently banks have been forced to increase the MCLR rate because the RBI has increased repo rate. This means that banks have to pay a higher interest rate to the reserve bank to borrow money. This cost is being passed on to customers in the form of increased MCLR. When the MCLR rises, it gets costlier for customers to borrow money. All types of loans get expensive, such as car loans and personal loans. Monthly EMIs also increase. This not only affects customers who are going to take new loans, but also customers who are currently paying installments."

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ABOUT THE AUTHOR

Vipul Das

Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).
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