Loans get costlier: PNB, BOB others hike rates after RBI’s 25-bps repo rate hike

Hours after the Reserve Bank of India raised its benchmark policy rate, major lenders including Punjab National Bank, Bank of Baroda, and Indian Bank announced an upward revision in their lending rates, making loans expensive for borrowers.

The central bank increased its key repo rate by 25 basis points to 5.50% on October 7— the first rate hike in nearly four years. The RBI also signaled that further rate increases could follow as accelerating inflation and a depreciating domestic currency forced a shift in policy stance.

The decision was made by the six-member Monetary Policy Committee (MPC), which voted unanimously to raise the repo rate. This marks the first rate increase under Governor Sanjay Malhotra since he assumed office in December 2024. While market participants broadly anticipated the rate increase, the central bank surprised observers by pivoting its policy stance to "calibrated tightening," effectively shutting the door on rate cuts in the immediate future.

Punjab National Bank (PNB) stated in a regulatory filing that, consequent to the RBI repo rate hike, it revised its Repo Linked Lending Rate (RLLR) from 8.10% (inclusive of a 0.35% BSP) to 8.35%, effective October 8. However, PNB clarified that its Marginal Cost of Funds Based Lending Rate (MCLR) and Base Rate remain unchanged.

Bank of Baroda (BoB) increased its Repo-Based Lending Rate (RBLR) by 25 basis points, moving from 7.90% to 8.15%. Chennai-based Indian Bank similarly hiked its Repo Linked Benchmark Lending Rate (RBLR) to 8.20% from 7.95%, taking effect on October 8.

Bank of India (BoI) and Indian Overseas Bank (IOB) both raised their RBLR to 8.35%, effective October 8. BoI confirmed the adjustment in a regulatory notification, citing the central bank's upward policy revision.

In the private banking space, Tamilnad Mercantile Bank raised its RLLR from 8.25% to 8.50%. Other public and private sector lenders are expected to follow suit with similar rate adjustments in the coming days.