Within a day of RBI hiking the key lending rate, banks started to raise interest rates which will increase EMIs for auto, home and business loans. Some big lenders including SBI, ICICI Bank and HDFC Bank had increased their Marginal Cost of Funds Based Lending Rates (MCLR) in anticipation of RBI raising repo rate, at which it lends money to banks.
In its second bi-monthly monetary policy of the current fiscal, the Reserve Bank of India yesterday hiked the key short-term lending rate by 0.25 per cent after a gap of about four and half years. The current repo rate stands at 6.25 per cent.
Joining big banks, Indian Bank and Karur Vsya Bank informed the stock exchanges about hiking the MCLR by up to 10 basis points for different tenures.
State-owned Indian Bank has raised its MCLR by 10 basis points for loans with tenure of 3 months to 5 years. Karur Vsya Bank too has effected similar hike for loans having tenure of six months and one year. While, Bank of Maharashtra has indicated it will increase the lending rate.
In a statement, its MD and CEO R P Marathe said that the repo rate transmission is expected to follow in terms of marginal hike in banks’ lending rates, which some of the banks have already announced.
The central bank tweaked the retail inflation range to 4.8-4.9 per cent in the first half of 2018-19, and 4.7 per cent in the second half.
The 6-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel also decided to retain projection of GDP growth for 2018-19 at 7.4 per cent, with risks evenly balanced around this number.
“The hike in the policy rate shows RBI’s concern over spikes in retail inflation, especially food inflation, in recent months,” Bank of India’s MD and CEO Dinabandhu Mohapatra said.