India’s third largest public sector lender Canara Bank has hiked its marginal cost of lending rate, or MCLR across all tenors, according to its website. The MCLR, a key point in deciding loan interests, has been hiked by up to 15 basis points, said Punjab National Bank. The new PNB MCLR rates have come into effect from September 7, Wednesday.
The Canara Bank MCLR rate hike comes over a month after the Reserve Bank of India increased its repo rates again by 50 basis points, to further cool down inflation that has remained above the central bank’s upper tolerance limit of 6 per cent. Banks hike or lower their lending rates on the basis of the RBI’s repo rates.
The revised marginal cost of funds-based lending rate (MCLR) across various tenors would be effective from Wednesday, the lender said in a regulatory filing.
The benchmark one-year MCLR will be 7.75 per cent against the existing rate of 7.65 per cent. The one-year rate is used to fix most consumer loans such as auto, personal and home loans.
The overnight and one-month tenor MCLRs are raised by 0.10 per cent each while the three-month maturity bucket increased by 0.15 per cent or 15 basis points to 7.25 per cent. The hike is in line with other peers following RBI raising its key lending rate last month. Last week, Punjab National Bank had also increased its MCLR rates.
Here are the tenor-wise MCLR effective from September 7, 2022, as per the Canara Bank website:
Over night: Old rate — 6.80 per cent; New rate — 6.90 per cent
One Month: Old rate — 6.80 per cent; New rate — 6.90 per cent
Three Month: Old rate — 7.10 per cent; New rate — 7.25 per cent
Six Month: Old rate — 7.60 per cent; New rate 7.65 per cent
One Year: Old rate — 7.65 per cent; New rate 7.75 per cent
As a result of the Punjab National Bank MCLR rate hike, housing, vehicles and personal loans are going to get more expensive as the EMIs will increase. However, existing home loan borrowers must note that the EMI will be revised only when the reset date of their loans arrive. The lender will increase or revise the interest rate on the borrowers’ home loans on the basis of prevailing MCLR when the reset date arrives. This means that if a person’s home loan is based on MCLR, and the reset date is in December, then he or she will have to pay the hiked EMIs from December. Till then, the borrower will pay on basis of their existing rates.
To control inflation, the Reserve Bank of India (RBI) in early August raised the key repo rate by 50 basis points (bps). Since May this year, the RBI has increased its repo rates by as much as 140 basis points. Inflation has cooled off since then, but is still over the RBI’s upper tolerance limit. RBI hiked repo rate, at which the central bank lends to banks, by 50 basis points to 5.4 percent.
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