Banks hike MCLRs, repo-linked lending rates post RBI rate action

New Delhi: Joining peer lenders, SBI, Kotak Mahindra Bank and Federal Bank are the latest in the list to revise their marginal cost of funds based lending rates (MCLRs) in addition to hikes in repo-linked rates from early October.

Following a hike in repo rate by the Reserve Bank of India on September 30 by 50 basis points to 5.90 per cent, banks raised their repo-linked lending rates by a similar margin. Gradually, they also raised the marginal cost of funds based lending rates.

The country's largest lender State Bank of India (SBI) has revised the MCLR for the benchmark one-year tenor to 7.95 per cent, up by 25 basis points from previous rate, which came to effect from October 15, 2022.

The one-year tenor MCLR is the rate against which most of the consumer loans are tied to.

SBI has also raised the two- and three-year tenor MCLRs to 8.15 per cent and 8.25 per cent respectively, as against 7.90 per cent and 8 per cent. The overnight, one-, three- and six-month rates have been raised in the range of 7.60-7.90 per cent.

Private sector lender Kotak Mahindra Bank said the MCLR for various tenors has been set in the range of 7.70-8.95 per cent with effect from October 16, 2022. Its revised one-year MCLR rate is 8.75 per cent. While south-based Federal Bank said its one-year MCLR on loans and advances has been revised to 8.70 per cent with effect from October 16.

Punjab National Bank, ICICI Bank, Yes Bank, HDFC Bank, Bank of Baroda are among the lenders which have already raised their MCLR rates following RBI rate action.

The hike in MCLR rates comes in addition to hike in repo rate linked lending rates by a host of lenders, including SBI, ICICI Bank, Punjab National Bank, Bank of India, and mortgage lenders as soon as RBI increased repo -- the rate at which it lends short term money to banks -- on September 30.

Private sector lender Axis Bank last revised its MCLR from September 17, 2022.

From October 1, 2019, all banks migrated to an interest rate linked to an external benchmark such as RBI's repo rate or Treasury Bill yield for a better transmission of rate revisions.

Reserve Bank had directed all banks to mandatorily link their interest rate to an external benchmark for all new floating rate personal or retail loans and floating rate loans to Micro and Small Enterprises (MSE) from October 1, 2019. The direction was extended later for medium enterprises as well from April 1, 2020.

The old rates are based on the MCLRs which are determined by factors such as deposit rates, repo rates, operating costs and the cost of maintaining the cash reserve ratio (CRR).

The hike in MCLRs and repo-linked rates have made most of the consumer loans such as auto, home and personal costlier for the borrowers.

RBI's Monetary Policy Committee (MPC) raised the key lending rate or the repo rate to 5.90 per cent ? the highest since April 2019, mainly aimed at arresting the high inflation.