Bank of India hikes MCLR; NDEs are going to get more expensive

The Bank of India raised its key overnight, 6-month and 1-year lending rate by 5 to 10 basis points. The revised marginal cost of funds-based lending rate (MCLR) will come into effect on Thursday (September 1). The MCLR is the lowest or minimum interest rate below which financial institutions are not allowed to lend. As a result of the rise in MCLR, existing and new borrowers of Bank of India will have higher EMIs.

Bank of India Overnight MCLR is now up 5 basis points (bps) to 6.85%, Six-Month MCLR is up 10bps to 7.45%, and Benchmark MCLR to 1 year was revised up 10 bps to 7.60. percent, according to the bank’s website.

The rest of the MCLR mandates remain intact. The one-month MCLR remains the same at 7.3%, the three-month MCLR remains at 7.35% and the three-year MCLR at 7.80%.

In recent months, banks have increased their interest rates on deposits as well as on loans. The increases follow monetary policy tightening by the Reserve Bank of India (RBI) to control inflation.

The RBI’s monetary policy committee raised the key repo rate by 50 basis points to 5.4% in early August. It was the third consecutive increase after a 50% increase in June and a 40% increase in May.

The country’s inflation in April stood at 7.79%, before dropping to 7.04% in May and falling back to 7.01% in June. Consumer inflation continued to fall to 6.71% in July. However, it is still above the RBI’s 2-6% target.

Besides banks, non-banks are also raising interest rates. Recently, LIC Housing Finance and Bajaj Housing Finance recently announced an increase in lending rates for home loans by 0.5%.

Bajaj Housing Finance has increased its rate by 0.50 percentage points, and the cheapest product for salaried and professional applicants will now be 7.70%. Despite the latest hike, the company claimed to offer loans at rates competitive with most of its peers.

Bajaj Housing Finance loan rates now stand at 7.70% for salaried and professional applicants. Independent candidates can benefit from home loans starting at 7.95% based on floating interest rates.

LIC Housing Finance has raised its prime rate (LHPLR) by 0.50 percentage points and new interest rates on home loans will now start at 8% from 7.50% previously.

The company’s managing director and managing director, Y Viswanatha Gowd, said the RBI’s decision to raise the repo rate by 0.50 per cent caused “minimal fluctuation” in monthly installments or duration of home loans and raised confidence that housing demand will remain robust.

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