The marginal cost of funds based on the lending rate is aimed to provide the calculation of the minimum interest rate for various types of loans that are offered by the banks.
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In recent months, the economic landscape has been witnessing fluctuations, and now, Indian banks are taking steps to tackle the rising interest rates. In May, equated monthly instalments (EMIs) saw an increase, and further hikes are on the horizon as banks have started raising their lending rates. ICICI Bank, Punjab National Bank (PNB), and Bank of India have already revised their marginal cost-based lending rate (MCLR) on loans, with the new rates being effective from August 1, as per information on the respective bank websites.
But before delving into the details of the revised MCLR rates, let’s understand what MCLR is. The marginal cost of funds based on lending rate (MCLR) is a method used by banks to calculate the minimum interest rate for different types of loans they offer. It is the lowest interest rate at which banks are allowed to provide loans to their customers, typically used for auto loans, personal loans, and home loans.
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ICICI Bank, one of India’s leading private sector banks, has taken the step of increasing its MCLR by 5 basis points (bps) across all tenures. As per the official website of the bank, the overnight and one-month MCLR has been hiked from 8.35 per cent to 8.40 per cent. The three-month and six-month rates are set at 8.45 per cent and 8.80 per cent, respectively. Furthermore, the bank has also revised its one-year MCLR from 8.85 per cent to 8.90 per cent.
In contrast, Punjab National Bank (PNB) has decided to keep the MCLR for all tenures unchanged for August. As per the PNB website, the overnight rate remains at 8.10 per cent, followed by one and three-month MCLRs at 8.20 per cent and 8.30 per cent, respectively. The six-month rate stands at 8.50 per cent, while the one-year MCLR is at 8.60 per cent. For longer-term loans, the MCLR for three years is now at 8.90 per cent.
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Bank of India, too, has implemented revised MCLRs on selected tenors. The overnight MCLR stands at 7.95 per cent, while one-month and three-month rates are at 8.15 per cent and 8.30 per cent, respectively. The six-month rate is set at 8.50 per cent, and the one-year MCLR stands at 8.70 per cent. For longer-term loans with a tenure of three years, the MCLR has been revised to 8.90 per cent.
