December 11, 2022

Auto, home and personal loans get expensive as banks raise interest rates – The New Indian Express


NEW DELHI: Auto, home and personal loans became more expensive as banks and other financial institutions hiked interest rates following RBI’s hike in repo rates on Wednesday.

A number of banks, including ICICI Bank, Bank of Baroda, Punjab National Bank (PNB), Bank of India, Indian Bank, Indian Overseas Bank and the country’s leading mortgage lender, HDFC Ltd, have raised lending rates for their clients.

The repo is the rate at which RBI lends to banks for their short-term borrowing needs. At its second bi-monthly monetary policy meeting on June 8 for FY23, the RBI raised the benchmark repo rate by 50 basis points to 4.90% with immediate effect.

It followed an off-cycle rate hike of 40 basis points in May to curb soaring inflation in the country, mainly triggered by supply-side issues from the Russian-Ukrainian war. Private sector lender ICICI Bank raised the external benchmark lending rate (EBLR) linked to the repo with effect from 8 June 2022 to 8.60% from 8.10% previously.

Public sector lender Punjab National Bank raised the repo-linked lending rate (RLLR) to 7.40% from 6.90% previously. Bank of Baroda, the third largest public sector bank, raised the RLLR to 7.40%.

HDFC Ltd has raised its Retail Prime Rate (RPLR) for home loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 50 basis points, effective June 10, 2022. This translates into a increase of Rs 31 by Rs 1 lakh for a 20-year loan.

India’s biggest lender, the State Bank of India, had revised its EBLR to 7.05% plus credit risk premium (CRP), days before the RBI’s monetary policy announcement. Indian Bank raised the RLLR to 7.70% and Bank of India to 7.75%.

Chennai-based public sector lender Indian Overseas Bank has raised the RLLR to 7.75% with effect from June 10. immediate effect.

It also increased the marginal cost of funds-based lending rate (MCLR) by 30 basis points each for different tenors, with the benchmark one-year rate rising from 7.40% to 7.70% previously.

Canara Bank had raised the one-year MCLR to 7.40% from 7.35% with effect from June 7, 2022. Most consumer loans are linked to the one-year MCLR rate. The MCLR system came into effect on April 1, 2016.

From October 1, 2019, all banks must lend only at an interest rate linked to an external benchmark such as the RBI repo rate or Treasury bill yield. As a result, the transmission of monetary policy through banks has gained ground.