Bank of Baroda Hikes Lending Rates By 5 Bps Across Tenures From August 12, EMIs To Go Up; Latest Rates Here!

Public sector lender, Bank of Baroda becomes the first among other lenders to hike benchmark lending rates right after RBI's policy rates decision. The PSU Bank has hiked the Marginal Cost of Funds Based Lending Rate (MCLR) by 5 basis points across tenures with effect from August 12, 2023.

From August 12, 1-year MCLR will be 8.70% from the current 8.65%. While the six-month MCLR is set at 8.45% from the present 8.40%. Also, the three-month MCLR will be at 8.35% from current 8.30%.

Further, the bank has hiked overnight and one-month MCLR to 8% and 8.25% effective from Saturday onward compared to the current rate of 7.95% and 8.20% respectively.

With the hike in MCLR rates, the equated monthly installments (EMIs) are likely to go up on term loans such as home loans, personal loans, and car loans among others.

MCLR is the minimum interest rate for term loans below which banks are not permitted to lend to borrowers. When banks revise MCLR, the interest rates on loans linked with this benchmark are also changed.

However, not every borrower will be impacted by this MCLR hike.

With effect from April 1, 2016, all floating rate rupee loans sanctioned and renewed were directed by RBI to be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which was introduced as the internal benchmark for banks.

However, from October 1, 2019, RBI introduced external benchmark lending rates including linking lending rates with policy repo rates. And directed the scheduled commercial banks to transmit to external benchmarks since MCLR did not deliver effective transmission of monetary policy. However, existing loans and credit limits linked to the MCLR/Baserate/BPLR will continue till repayment or renewal, as the case may be.

Accordingly, not all borrowers will be affected by the hike in MCLR by Bank of Baroda.

Surprisingly, the Bank of Baroda has hiked MCLR rates despite RBI keeping the policy repo rate unchanged for the third time in a row.

On Thursday, RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. Further, the standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. Also, the MPC members decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.