HDFC Bank, IDFC First hike MCLR post repo rate hike by Reserve Bank

HDFC Bank, the largest private sector lender in the country, has raised its marginal cost of funds-based lending rate (MCLR) by 5 – 10 basis points (bps) across loan tenors, with effect from August 8. The interest rate hike comes after the six-member monetary policy committee (MPC) hiked the benchmark repo rate by another 50 bps to 5.40 per cent last week.

Accordingly, HDFC Bank’s overnight and one-month MCLR now stands at 7.80 per cent; 3-month MCLR is at 7.85 per cent; 6-months is at 7.95 per cent; 1-year at 8.10 per cent; 2-year at 8.20 per cent; and 3-year at 8.30 per cent.

Another private sector lender IDFC First Bank has also revised its MCLR upwards by 5-15 bps across loan tenors, effective August 8. Its overnight and one-month MCLR now stand at 8 per cent; 3-months is at 8.25 per cent; 6-months is at 8.60 per cent; and 1-year at 8.95 per cent.

Last week, public sector lender Canara Bank also hiked its MCLR by 5-15 bps across loan tenors, taking its overnight and one-month MCLR to 6.80 per cent. The three-month MCLR now stands at 7.10 per cent; six months at 7.60 per cent; and one year at 7.65 per cent.

Most lenders have already hiked their external benchmark-linked loan rates, following the rate hike by the MPC last week. ICICI Bank, Punjab National Bank, and Bank of Baroda raised their external benchmark linked loan rates by 50 bps over the weekend. ICICI Bank’s external benchmark lending rate now stands at 9.10 per cent, while Bank of Baroda’s repo-linked lending has been revised upwards to 7.95 per cent, reflecting a spread of 2.55 per cent over the repo rate.

RBL Bank has also revised its repo-linked lending rate by 50 bps to 10.50 per cent.

RBI’s latest data suggests that about 43.6 per cent of loans in the banking system are linked to the external benchmark, which could be the repo rate or yields on government securities such as 91-day and 182-day Treasury Bills. And, about 49.2 per cent of the banking system loans are linked to the MCLR.

The MPC raised the repo rate to a three-year high of 5.40 per cent last week owing to inflation concerns and to shield the exchange rate, which has come under pressure since war broke out in Europe in February.

This is the third consecutive rate hike by the MPC since May. The RBI has raised its repo rate by 140 basis points cumulatively since it started the process of monetary tightening to tame inflation which has been above the RBI’s upper tolerance limit for quite some time now.