Bank of India hikes overnight, 6 months, 1 year lending rates; EMIs set to increase

New Delhi: Bank of India has raised its overnight, 6-month, and 1-year lending rates by 5-10 basis points. Thursday will see the implementation of the revised marginal cost of fund-based lending rate (MCLR) (September 1). The MCLR is the lowest or minimum interest rate at which financial institutions may not make loans. Existing and new Bank of India borrowers will face higher EMIs as a result of the MCLR increase.

According to the bank's website, the overnight MCLR has now increased by 5 basis points (bps) to 6.85 percent, the six-month MCLR has increased by 10 bps to 7.45 percent, and the benchmark 1-year MCLR has been revised upward by 10 bps to 7.60 percent.

The remaining MCLR terms are unaffected. The one-month MCLR remains at 7.3%, the three-month MCLR remains at 7.35%, and the three-year MCLR remains at 7.80%.

Banks have been raising interest rates on both deposits and loans in recent months. The hikes are in response to the Reserve Bank of India's (RBI) tightening of monetary policy in order to control inflation.

In early August, the RBI's Monetary Policy Committee raised the key repo rate by 50 basis points to 5.4 percent. It was the third consecutive hike, following a 50% increase in June and a 40% increase in May.

In April, the country's inflation rate was 7.79 percent, but it fell to 7.04 percent in May and 7.01 percent in June. In July, consumer inflation fell further to 6.71 percent. However, it remains above the RBI's target range of 2-6 percent.

In addition to banks, non-banks are raising interest rates. Recently, LIC Housing Finance and Bajaj Housing Finance announced a 0.5 percent increase in home loan lending rates.

Bajaj Housing Finance increased its rate by 0.50 percentage points, and the lowest priced product for salaried and professional applicants is now 7.70%. Despite the latest increase, the company claims to be offering loans at competitive rates when compared to the majority of its competitors.

For salaried and professional applicants, Bajaj Housing Finance's lending rates are now 7.70%. Self-employed applicants can obtain home loans with interest rates starting at 7.95 percent based on floating rates.

LIC Housing Finance has raised its prime lending rate (LHPLR) by 0.50 percentage point, and new home loan interest rates will now begin at 8%, up from 7.50% previously.

Y Viswanatha Gowd, the company's chief executive and managing director, stated that the RBI's decision to raise the repo rate by 0.50 percent has caused "minimal fluctuation" in monthly instalments or loan tenure, and expressed confidence that demand for housing will remain strong.