Just a day after the monetary policy review committee members unanimously hiked key repo rate for the first time in over 4 years to 6.25%, banks across private and public space have begun to increase the marginal cost of funds based lending rate or MCLR. This would increase the EMI for borrowers of home, business and auto loans.
Indian Bank has revised MCLR rate higher by 10 basis points for loans with tenure of 3 months to 5 years. At the same time, Karur Vysya Bank has also hiked lending rates for loan tenure of six months and 1 year by 10 basis points. 1 basis point is one-hundredth of a percentage point.
Another state-run lender, Bank of India hiked MCLR rate across maturities by 10 basis points. Loans with one-year tenure will be available at 8.5% while the overnight and six months loan will cost 7.9% and 8.45%, respectively. The new rates shall come into effect from June 10.
While after the key lending rate hike by HDFC Bank on Thursday that come into effect from June 7, one-year loan will be offered at an interest rate of 8.4%. While other loans for six months and three years will cost a customer 8.25% and 8.7% respectively. SBI's one-year MCLR currently stands at 8.1 per cent.
While some of the big lenders such as SBI, ICICI Bank, HDFC Bank, PNB, BoB and Kotak Mahindra Bank had already brought about a hike in MCLR before the monetary policy announcement anticipating a rate hike by the RBI.
Marginal cost of funds based lending rate or MCLR is arrived at by the banks based on the marginal cost of funds, cost per se CRR maintenance, tenure and other operating expenses.