Government-owned lender Union Bank of India has increased its marginal cost-based lending rate (MCLR) in the range of 0.05 per cent to 0.35 per cent, which would make the loans from the bank more expensive. As per a UBI notification, the new rates have already become effective from September 11. The MCLR is the base rate adopted by banks that acts as a key point in deciding various loan rates. Almost all the banks have revised their lending rates after the Reserve Bank of India raised its key repo rate last month by 50 bps to 5.40 per cent to tame the rising CPI inflation.
The Union Bank of India has set MCLR rates for overnight and one-month tenures to 7.00 per cent and 7.15 per cent, thus increasing them by 5 bps.
For the three-month tenure, the rates are the same as before and are at 7.25 per cent. For tenures of six months and one year, the new rates are 7.55 per cent and 7.75 per cent, respectively, which means they have been hiked by 5 bps.
For tenures of two years and three years, the UBI MCLR rates are 7.95 per cent and 8.10 per cent, which have been increased by 20 bps and 35 bps, respectively.
|Tenures||Previous loan rates||New rates|
Rates of other lenders
Earlier this month, ICICI Bank and Canara Bank also increased their lending rates. While ICICI Bank hiked its MCLR by 10 bps across tenors, public sector lender Canara Bank increased its MCLR by up to 0.15 per cent.
A quick comparison of the rates: ICICI Bank vs Canara Bank vs Union Bank of India
|Tenures||ICICI Bank||Canara Bank||Union Bank of India|
Most central banks across the world go for a rate revision, which increases the cost of funds for banks and other lenders. The RBI revised its repo rates, or key short-term lending rate, thrice this year. There has been a 140 bps hike in the repo rate since May 2022 to control inflation.
When there is a rate hike, banks have to pay more for the money they borrow from RBI. In return, banks increase their own interest rates on various loans, making the equated monthly installments (EMIs) costlier for the customers.
(With agency inputs)
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