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Public sector lender Bank of Baroda (BoB) on Tuesday announced an increase in its marginal cost of funds-based lending rate (MCLR) by up to 35 basis points (bps) across tenors with effect from January 12. MCLR is the minimum interest rate below which a bank cannot lend, except in certain cases.
According to the announcement, the benchmark MCLR for one year has been updated by 20 basis points from 8.3 per cent to 8.5 per cent. The overnight MCLR has been hiked by 35 bps from 7.5 per cent to 7.85 per cent. The MCLR for a tenor of one month has been raised from 7.95 per cent to 8.15 per cent. For three months and six months, the MCLR has been changed from 8.05 per cent and 8.15 per cent to 8.25 per cent and 8.35 per cent respectively.
The hike is expected to impact corporate borrowers. Retail lending, including housing, personal credit and SMEs, is predominantly linked to external benchmarks like the repo rate.
The bank had increased the MCLR in December by up to 30 basis points. January’s hike is steeper than December’s as well as November’s hike.
In December, the benchmark one-year tenor MCLR has been raised by 25 basis points to 8.30 per cent. The overnight rate was raised to 7.50 per cent from 7.25 per cent then.
Axis Bank and the country’s largest public lender the State Bank of India (SBI) also announced a hike in their MCLRs in December. The SBI hiked it by 15 bps and Axis Bank by 30 basis points.
This comes as the central bank has continued to hike the benchmark repo rate. It has raised the repo rate by 225 basis points since May 2022.
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