Bank of Baroda recently announced a hike in lending rates by 5 basis points (bps). This increment is applicable for tenures of 3-months, 6-months and 1-year, effective from this date.

Bank of Baroda has increased the lending rate. India's leading public sector bank, Bank of Baroda, known for its strong domestic presence, on Friday announced a hike in lending rates by 5 basis points (bps). The increase will be implemented in 3-month, 6-month and 1-year tenures effective Monday, August 12. According to the bank's regulatory filing on Friday, BoB said it has adjusted the marginal cost of funds-based lending rate (MCLR). As a result, loan installments will increase for borrowers.

According to the statement, BoB has increased the 3-month MCLR to 8.50 percent from 8.45 percent earlier. 6-month MCLR increased to 8.75 per cent (previously 8.70 per cent), and 1-year MCLR increased from 8.90 per cent (previously 8.95 per cent). Bank of Baroda has seen an increase of 5 basis points in interest rates per tenure, although overnight MCLR remains at 8.15%, 1-month MCLR is firm at 8.35%.

Banks increase MCLR rate

Key public sector banks such as Canara Bank and UCO Bank have increased their Fund Based Lending Rate (MCLR) over various loan tenures. As a result, consumers are facing increased costs. The hike was in response to the Reserve Bank of India's (RBI) choosing to maintain the benchmark interest rate at 6.50% for the ninth consecutive time.
UCO Bank's Asset Liability Management Committee has recently approved a slight hike of 5 basis points in its lending rate for a specified period effective from 10 August 2024. Similarly, Canara Bank is also looking to increase its lending rates by an equal margin for all. Terms, from 12th August 2024.

MCLR

In 2016, the Reserve Bank of India (RBI) began the practice of banks using marginal cost of lending rates as a basis for setting their own rates. Banks are bound to follow these norms set by the RBI and not lend below this rate. Hence, these banks set their lending rates by adding their own defined margin to this rate.

Whenever this base rate (MCLR) increases, there is inevitably an increase in the interest rates directly linked to it. This change causes borrowers to face increased EMIs and an increase in the overall cost of borrowing. The ripple effect of this increase can have significant consequences, such as leaving potential borrowers with less disposable income, halting new borrowing, and potentially creating difficulties in both personal financial planning and business investing.