Banks anticipate RBI rate hike, increase loan rates

Ahead of the Reserve Bank of India’s (RBI) bimonthly monetary policy this week, several banks and shadow banks have increased their loan rates. The rate setting panel is expected to increase its lending rate by 35-50 basis points. On Monday, the country’s second largest private lender ICICI Bank and state-owned Bank of India raised their loan rates effective August 1.

ICICI Bank raised interest rates on marginal cost of funds based lending rate (MCLR) loans by 15 basis points across tenors. The bank has raised onemonth MCLR interest rate to 7.65 per cent and interest rate on three months, six months and one year MCLR interest rate has been hiked to 7.7 per cent, 7.85 per cent and 7.9 per cent, respectively.

The one-year MCLR is considered important from a retail loans perspective, as a bank's long-term loans like home loans are linked to this rate.

The overnight MCLR interest rate has been incresed to 7.65 per cent from 7.5 per cent earlier.

Bank of India has raised its MCLR by 10 basis points (bps). This rise would result in increased EMI payments for old borrowers servicing loans under the MCLR regime. The one-year MCLR has gone up from 7.50 to 7.60 percent. A 10 basis point increase has been made to the overnight, one-month, and three-month MCLRS, bringing them to 6.80, 7.30, and 7.35 per cent, respectively. The six-month and three-year MCLR has been raised to 7.45 and 7.80 percent, respectively.

Last week, Bandhan Bank and HDFC Ltd announced raising their loan rates. HDFC Ltd the country's largest mortgage lender increased its benchmark lending rate by 25 basis points, a move that will make loans dearer for both existing and new borrowers. This was the fifth hike effected by

HDFC in two months. In all, the rate has been increased by 115 basis points since May this year. The revised rates for new borrowers range between 7.80 per cent and 8.30 per cent, depending on credit and loan amount. The existing range is 7.55 per cent to 8.05 per cent.

Private sector lender Bandhan Bank has adjusted its marginal cost of funds based lending rates (MCLR) on loans. The bank's one-year MCLR is 9.45 per cent. Its MCLR for overnight, one-month, two-month and threemonth loans is 8.49 percent. The bank’s MCLR for six months, two years, and three years is 9.09 percent, 9.78 per cent and 10.06 per cent. The new rates are effective from July 30.