Mumbai: After the RBI’s decision to hike Repo rate by 25 bps, Indian bank has increased its Marginal Cost based lending rates (MCLR) across all tenors. The Overnight MCLR has been increased by 5 bps to 8% from the existing 7.95%.
One month MCLR have been hiked by 10 bps to 8.10% from the existing 8.00%. Three Month MCLR hiked to 8.20% to 8.30%. Six month MCLR hiked from 8.30% to 8.40%, One year MCLR has been hiked from 8.40% to 8.50%. Similarly, 3 year and 4 year MCLR has been hiked to 8.70% and 8.95% respectively. The new rates will be effective from 11th June.
The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank – on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower. The MCLR methodology for fixing interest rates for advances was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the base rate system introduced in July 2010.