Major banks increase lending rates, post RBI rate hike

8 Dec 2022 , 11:55 AM

A number of lenders, including Bank of India and HDFC Bank, raised their benchmark lending rates on Wednesday, hours after the RBI decided to boost the repo rate by 35 basis points. This action will cause an increase in EMIs. The state-owned Bank of India announced on its website that the effective Repo Based Lending Rate (RBLR) as of December 7 is 9.10% based on the revised repo rate (6.25%).

With effect from this Wednesday, the private sector HDFC Bank has increased its marginal cost of funds-based lending rate (MCLR).

According to the HDFC Bank website, the one-year MCLR, which serves as the benchmark for many consumer loans, has increased by 50 basis points to 8.60%.

As of December 1, ICICI Bank has already increased its MCLR rate. Following the change, the benchmark rate for one year increased from 7.90% to 8.40%, an increase of 50 basis points.

The majority of consumer loans, including auto, personal, and house loans, are priced using the benchmark one-year MCLR.

The Reserve Bank of India (RBI) raised the benchmark repo rate earlier in the day yesterday by 35 basis points to 6.25%, marking the sixth straight increase since May.

Since May of this year, the RBI has increased the benchmark rate a total of 2.25%.

As a result, the bank rate, marginal standing facility rate, and standing deposit facility rate are all changed to 6.50%.

After the RBI increased the benchmark interest rate by 35 basis points, other banks are also anticipated to take similar action. The banks will eventually raise their Repo-Linked Lending Rate (RLLR) and External Benchmark Based Lending Rate (EBLR) in line with the repo rate.