Ahead of the Reserve Bank of India’s key policy rate decision, top lenders raise their marginal cost based lending rates (MCLR) by at least 10 basis points (bps).
One basis point is one hundredth of a percentage point.
On Friday, just after country’s largest lender State Bank of India (SBI) hiked its MCLR by 10 bps across all tenures up to three years, HDFC Ltd, ICICI Bank and Kotak Mahindra Bank also reciprocated by hiking by a similar margin. Punjab National Bank had revised its MCLR on Thursday.
MCLR is the minimum lending interest rate below which financing institutions and banks cannot give loans.
Most home loans, car loans and other personal loans are largely linked to one-year MCLR and the EMIs across loans are likely to go up, pinching the existing and new borrowers.
On June 6, the RBI is due to announce its key policy repo rate decision, which impacts the banks’ short term funding interest rate, the cost of which most banks pass on to the customers.
Amid rise in non-performing assets (NPAs) from corporate loans, shrinking margins and rising cost of funds due to rise in bond yields, banks have started to increase interest rates.
On a 10 bps increase in the lending rate will increase the EMI on a Rs 30-lakh housing loan taken for a period of 20 years by about Rs 200 per month (which is Rs 2,400 annually), assuming that the current rate of interest is 8.15 percent, which goes up to 8.25 percent after the increase in the lending rates.
SBI
The overnight and one-month tenure marginal cost of funds based lending rate (MCLR) have been raised to 7.90 percent (from 7.80 percent), three-month tenure rate is 7.95 percent (from 7.85 percent) while six-month tenure is 8.10 percent (from 8.00 percent) per annum, as per SBI’s website.
For one, two and three years, the MCLR has been hiked to 8.25 percent, 8.35 percent and 8.45 percent, respectively.
Base rate (minimum rate offered on loans taken before April 2016) was kept unchanged since its last revision on April 1, 2018, at 8.70 percent.
On May 28, SBI hiked interest rates on its retail fixed deposits for short to medium term by up to 25 bps.
ICICI Bank
The overnight and one-month tenure MCLR stands at 8.05 percent, three-month tenure rate is 8.10 percent while six-month tenure is 8.35 percent and one-year tenure loans at 8.40 percent.
The one-year rates are kept lower than SBI’s.
HDFC
HDFC or Housing Development Finance Corporation, one of the biggest private player in the home financing market, has increased its Retail Prime Lending Rate (RPLR), on which its adjustable rate home loans (ARHL) are benchmarked, by 10 bps, with effect from June 2, 2018.
Loans up to Rs 30 lakh will be offered between 8.40 – 8.90 percent to women borrowers while the rest would get it at 8.45 – 8.95 percent. Loans above 30 lakh will be charged 8.50 - 9.00 percent for women and 8.55 - 9.05 percent to other borrowers.
The interest rates differ on different loan product variants.
Keki Mistry, Vice Chairman and CEO of HDFC said, “I think there is an even chance of rate change in this or the next policy. US rates, its bond yields have gone up significantly, oil prices have gone higher and so that has created a situation that there is less liquidity in the system and hence bond yields here have gone up.
This directly impacts cost of funds which has incrementally gone up a lot and so this 10 bps rate hike will offset that and ensure our spreads will remain stable, Mistry added.
Spreads is the difference between interest rates on borrowing and lending.
PNB
Delhi-based second largest government-owned lender Punjab National Bank (PNB) revised its MCLR:
| Duration | Old MCLR | Revised MCLR |
| 6 months | 8.25% | 8.30% |
| 1 year | 8.30% | 8.40% |
| 3 years | 8.45% | 8.55% |
| 5 years | 8.60% | 8.70% |
PNB also revised its base rate 9.25 percent from 9.15 percent previously.
Kotak Mahindra Bank
Uday Kotak-led Kotak Mahindra Bank also hiked its MCLR by 10-20 bps across tenures effective from June 1.
Kotak bank’s overnight MCLR stands at 7.95 percent, one-month rate is at 8.15 percent while three and six month MCLR is at 8.50 percent and 8.60 percent.
Its one-year and two-year MCLR stands at 8.90 percent and three- year at 8.95 percent.
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