Bank Loan Rates: Borrowers are likely to face higher interest costs after several banks raised their lending rates following the Reserve Bank of India’s (RBI) latest repo rate hike. Punjab National Bank (PNB), Indian Bank and Bank of Baroda are among the lenders that have increased their benchmark lending rates by up to 0.25 percentage points.
The changes follow the RBI’s decision on Wednesday to increase the repo rate by 25 basis points, taking it to 5.50%. The move marks the first repo rate increase in four years.
PNB Raises Repo-Linked Lending Rate
Punjab National Bank has revised its Repo Linked Lending Rate (RLLR) from 8.10% to 8.35%, according to a filing with the stock exchange. The revised rate became effective from October 8.
However, PNB said its Marginal Cost of Funds Based Lending Rate (MCLR) and Base Rate have not been changed.
The increase in the repo-linked rate could affect borrowers whose loans are linked to the benchmark, depending on the terms and reset mechanism applicable to their loan.
Indian Bank, Bank of Baroda and Other Lenders Revise Rates
Indian Bank has increased its Repo-Linked Benchmark Lending Rate (RBLR) from 7.95% to 8.20%. The revised rate came into effect on October 8.
Bank of Baroda has also raised its RBLR, moving it from 7.90% to 8.15%.
Bank of India and Indian Overseas Bank have set their RBLR at 8.35%, with the revised rates effective from October 8.
In the private banking sector, Tamilnad Mercantile Bank has increased its repo-linked lending rate from 8.25% to 8.50%.
Other banks and financial institutions may also review their benchmark lending rates following the RBI’s policy decision.
What Is the Repo Rate?
The repo rate is the rate at which the RBI lends funds to banks. When the central bank raises this rate, the cost of borrowing for banks can increase.
Banks may subsequently revise lending rates linked to external benchmarks, which can increase the interest cost for borrowers with applicable loans. The actual impact on a customer’s EMI or loan tenure depends on the type of loan, benchmark, outstanding amount and the terms of the loan agreement.
With the repo rate now at 5.50%, borrowers should check their applicable benchmark and the latest rate communicated by their respective bank to understand how the revision may affect their loans.