Private sector lender Yes Bank has hiked marginal cost of funds based lending rate (MCLR) by 10-15 basis points (bps) across tenors, with effect from May 2.
MCLR (explained way below) for overnight tenor at Yes Bank is now 6.85 percent, for one month 7.30 percent, three months(7.45 percent, six months 8.25 percent, and one year 8.60 percent.
On April 30, Yes Bank revealed a strong show for the March quarter reporting a profit of Rs 367 crore against a loss of Rs 3,788 crore a year ago, driven by a sharp downtick in provisions, strong net interest income and pre-provision operating profit (PPoP) with an improvement in asset quality.
On a sequential basis, profit grew 38 percent.
For the full year, the bank reported a profit for the first time since FY19 at Rs 1,066 crore but net interest income declined 12.5 percent to Rs 6,498 crore.
The hike comes on the heels of other banking majors increasing MCLR over the past few weeks. State Bank of India (SBI), the country’s largest lender, increased MCLR by 10 bps across tenures, effective April 15 while Axis Bank hiked the rate by 5 bps across tenures effective April 18 and Bank of Baroda raised MCLR by 0.05 percent across tenors with effect from April 12.
| YES BANK's MCLR effective May 2 as follows: | |
| Tenor | MCLR (%) |
| Overnight | 6.85 |
| One Month | 7.30 |
| Three Months | 7.45 |
| Six Months | 8.25 |
| One Year | 8.60 |
MCLR is an internal reference rate for banks set by the Reserve Bank of India (RBI) to help determine a minimum interest rate on various types of loans. The final rate of lending will also include risk premium and spread charged by banks.
To simplify further, MCLR is the minimum rate at which banks can offer loans to end-consumers. The MCLR method was introduced by the RBI in 2016 to help borrowers avail various loans, like home and auto loans, and enable a smooth transmission of the central bank’s repo rate.
The repo rate is the rate at which RBI lends funds to banks.
Also Read | HDFC hikes retail prime lending rate: Five key questions answered
The RBI’s repo rate has been kept unchanged at four percent since May 2020. That’s the rate at which the central bank lends short-term funds to banks.
Retail inflation in India jumped to a 17-month high of 6.95 percent in March from 6.07 percent in February, driven by high food prices. If inflation concerns persist and there are no shocks to growth, interest rates will likely be hiked later this year, analysts said.
Most economists expect the RBI’s monetary policy committee (MPC) to change its stance to ‘neutral’ in June and follow up with an increase in the key policy rate, which could be the first in a series of hikes this year.
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