Banks hike MCLR: Here's how your EMIs will be impacted

Although RBI has kept its policy repo rate unchanged at 4%, borrowers might have gotten too comfortable with their term loan interest rates. However, that is about to change as major lenders like SBI, Kotak Bank, Axis Bank, and Bank of Baroda have made 5-10 basis points hikes in their MCLR. This could simply mean your retail loans for a car, personal, or home are set to go higher which would have an impact on your equated monthly instalments (EMI). But should borrowers panic about the rise in MCLR?

Government-owned SBI which is also one of the largest lenders in the country, hiked its MCLR by 10 basis points for the first time in three years since 2019, while lenders like Bank of Baroda, Axis Bank, and Kotak Bank made 5 basis points hike in the benchmark lending rates.

Newly-appointed Finance Minister Miftah Ismail said on Thursday that he was leaving for Washington, where he was expected to meet International Monetary Fund (IMF) officials for the revival of a loan facility that was stalled following the premature end of the Imran Khan government earlier this month.

Ismail, who has replaced Shaukat Tarin in the role of the country's finance czar in the new coalition setup, tweeted before leaving for Washington that the purpose of the visit was to "put back on track our IMF program that PTI and IK (Imran Khan) derailed, thus endangering our economy".

He added that he would travel to London on the way, where he would meet PML-N supremo Nawaz Sharif.

On Wednesday, Ismail told media persons during a press conference in Islamabad that his priority was to secure one tranche of $1bn from the IMF and prepare for the coming budget and not to club two quarterly reviews. He further said he was expecting to meet the IMF managing director, chief executive officer of the World Bank, executive directors of the G-7 nations, ministers of Turkey, Saudi Arabia and China and the IMF mission chief to Pakistan.

In the same press briefing, Ismail revealed that the IMF wanted Pakistan to do away with subsidies extended by the previous government, including those on fuel prices and power tariffs - two relief measures that former prime minister Imran Khan had announced right before the filing of a no-trust motion against him. The move had invited criticism with many describing it as going against Pakistan's commitments to the IMF for the $6 billion Extended Fund Facility.

The IMF had set a series of prior conditions involving steep fiscal adjustment close to Rs1.3 trillion, Ismail said, adding that the IMF wanted an increase in fuel prices to breakeven and taxes restored, amnesty scheme discontinued for industries, circular debt reduced, power rates raised and fiscal savings ensured in order to completely reverse the

PTI government's February 28 relief package.

The previous government had a commitment to have a primary balance of Rs25bn which was now in deficit at Rs1.3 trillion. "We have heard their (IMF) position but have not made any commitment yet," Ismail said.

The PML-N led coalition government, which had severely criticised the previous Imran-led government for first failing to control fuel prices in the country and later for "derailing" the IMF programme through fuel and electricity subsidies, is yet to reverse the measure of reducing petrol prices with Prime Minister Shehbaz Sharif last week rejecting the Oil and Gas Regulatory Authority's (Ogra) proposal in this regard.

Assuring that no burden would be passed on to the people in the process to meet the IMF's conditions, Ismail added, "But something would have to be done because the IMF programme is inevitable."