Bank of Baroda (BoB), a financial company that is part of the public sector, made an announcement on Tuesday that it would raise its marginal cost of funds-based lending rate (MCLR) by up to 35 basis points (bps) across all tenors beginning on January 12. The marginal cost of funds adjustment ratio (MCLR) is the lowest interest rate at which a bank is allowed to lend money, with a few exceptions.
In accordance with the statement, the benchmark MCLR for one year has been raised from 8.3 percent to 8.5 percent, representing an increase of 20 basis points. The overnight MCLR has been increased by 35 basis points, moving the rate up from 7.50% to 7.85%. The one-month MCLR has been increased from 7.95 percent to 8.15 percent, reflecting the increase in inflation. The MCLR has been increased from 8.05 percent and 8.15 percent to 8.25 percent and 8.35 percent, respectively, for three months and six months. Previously, those rates were 8.05 percent and 8.15 percent.
It is anticipated that the increase would have an effect on corporate borrowers. The vast majority of retail lending, which includes mortgages, credit cards, and loans to small and medium-sized businesses, is tied to external benchmarks like as the repo rate.
The marginal corporate lending rate (MCLR) was raised by the bank by up to 30 basis points in December. The trek in January is more challenging than the hike in December and the hike in November.
The benchmark one-year MCLR saw an increase of 25 basis points in December, bringing the rate up to 8.30 percent. After that, the tariff for overnight stays was increased to 7.50 percent, up from 7.25 percent.
In December, Axis Bank and the State Bank of India (SBI), which is the biggest state lender in the nation, both announced that they would be increasing their MCLRs. It was increased by 15 basis points by the SBI, and by 30 basis points by Axis Bank.
This comes at a time when the government bank has been steadily increasing the benchmark repo rate. Since May 2022, the repo rate has been increased by 225 basis points as a result of this.