MUMBAI: Home and auto loans are set to get costlier as banks have increased their benchmark lending rates. State Bank of India (SBI), Punjab National Bank (PNB) and ICICI Bank Ltd all increased their marginal cost of funds-based lending rate (MCLR) by 10 basis points today just ahead of the Reserve Bank of India’s monetary policy committee (MPC) meeting where it decides on rates.
HDFC, Kotak Bank, Union Bank have also hiked rates. The MPC will announce its decision on 6 June.
The marginal cost of lending rate (MCLR) is reviewed every month by banks and reflects their cost of funds. Following the latest hike, SBI’s one-year MCLR stands at 8.25% versus 8.15% earlier. This is the second rate hike by the bank in 2018.
While HDFC has increased its retail prime lending rate (PLR)— its benchmark for home loans — by 10bps, ICICI Bank also hiked its one-year MCLR + by 10bps to 8.40%.
Following this, HDFC’s home loans will start at 8.5%. The new rates come into effect from 2 June and are due to increase in the cost of wholesale funds.
PNB has hiked one-year MCLR to 8.4% + from 8.3% earlier. Union Bank increased rates by 10bps to 8.45%. But Kotak Bank has increased its one-year MCLR by a sharp 20bps to 8.9%.
Banks have not been waiting for the RBI decision and have moved ahead with an increase in deposit rates. On Friday, the third largest private lender Axis Bank hiked rates on deposits — by introducing a new tenure of 12 months, 5 days to under 12 months, 11 days— to 7.4%.
Another private lender, Mangaluru-based Karnataka Bank, raised rates to 7.25% from 7.10% on deposits for a period of 1 year to 2 years. Earlier this week, SBI hiked term deposit rates for amounts of less than Rs 1 crore by up to 25bps.
Banks have been increasing deposit rates as loan growth has picked up and deposit growth has been slowing down with continued remonetisation and savings moving into mutual funds. The increase in deposit rates will automatically translate into higher lending rates in coming weeks as the MCLR is computed by taking into account the cost of deposits.