Several banks in India have revised their benchmark lending rates following the Reserve Bank of India’s (RBI) decision to increase the repo rate. Punjab National Bank (PNB), Indian Bank, UCO Bank, Bank of Baroda, Bank of India, Indian Overseas Bank and Tamilnad Mercantile Bank are among the lenders mentioned in connection with the changes.
The revisions could increase borrowing costs for customers with home loans, car loans and other loans linked to the affected benchmarks.
On October 7, the RBI raised the repo rate by 25 basis points, taking it from 5.25% to 5.50%. The decision was supported by all six members of the RBI’s Monetary Policy Committee (MPC), according to the information provided.
Why Did the RBI Increase the Repo Rate?
The reported rate adjustment was aimed at managing inflation. Retail inflation stood at 4.82% in August, while rising crude oil prices were cited as one of the factors contributing to inflationary pressure.
The RBI’s repo rate is the rate at which it lends money to banks. Changes in this rate can influence banks’ borrowing costs and lending rates, particularly for loans linked to external benchmarks.
The article also notes that the US Federal Reserve raised interest rates by 25 basis points in September.
PNB and Indian Bank Revise Lending Rates
Punjab National Bank increased its Repo-Linked Lending Rate (RLLR) by 25 basis points on October 8, taking it to 8.10%. The bank also maintained a strategic premium of 0.35%. However, its Marginal Cost of Funds-Based Lending Rate (MCLR) and base rate remained unchanged.
Indian Bank raised its Repo-Linked Benchmark Lending Rate (RBLR) from 7.95% to 8.20%, reflecting an increase of 25 basis points.
These changes may affect borrowers whose loan interest rates are linked to the respective benchmarks. The actual impact on monthly instalments will depend on the loan terms and applicable reset provisions.
Bank of India, UCO Bank and Other Lenders Update Rates
Other banks have also announced changes to their lending benchmarks, according to the supplied information.
Bank of India increased its RBLR from 7.90% to 8.15%. The report also mentions a separate revision in its repo-linked lending rate from 8.10% to 8.35%, with the repo rate component rising from 5.25% to 5.50% and the markup remaining at 2.85%.
Indian Overseas Bank increased its repo-based lending rate to 8.35%, while Tamilnad Mercantile Bank raised its rate to 8.50%. Both changes took effect on October 8.
UCO Bank revised its repo-linked UCO Float Rate from 8.05% to 8.30%. Its UCO Prime Rate increased from 5.25% to 5.50%, while its three-month Treasury Bill Linked Rate (TBLR) moved from 5.25% to 5.30%.
What the Rate Changes Mean for Borrowers
Borrowers with loans linked to revised benchmarks may face higher interest costs following the changes. The effect on an existing loan will depend on its benchmark, outstanding balance, repayment period and the bank’s interest-rate reset schedule.
Customers should check their latest loan statements and contact their respective banks to understand whether the revised rates apply to their accounts and whether their EMIs or loan tenures will change.
Disclaimer: This article is intended for general informational purposes only and is based on the information provided. Lending rates and their effective dates may vary by bank and loan product. Readers should verify the latest rates directly with their banks and consult official RBI announcements before making financial decisions.