Bank of Baroda on Friday announced that it would hike lending rates by 5 basis points (bps) on 3-month, 6-month, and 1-year tenures, with effect from August 12, 2024. With this latest hike in the marginal cost of funds-based lending rates (MCLR), EMIs will increase for borrowers.
According to a regulatory filing by Bank of Baroda on August 9, “The bank has reviewed/ changed marginal cost of funds based lending rate (MCLR) with effect from August 12, 2024.”
As per the filing, Bank of Baroda has hiked its 3-month MCLR from 8.45 per cent to 8.50 per cent, its 6-month MCLR from 8.70 per cent to 8.75 per cent, and the benchmark 1-year MCLR from 8.90 per cent to 8.95 per cent. It is a 5 bps hike on each tenure.
A basis point (bp) is a 100th of a percentage.
Meanwhile, Bank of Baroda has kept its overnight MCLR and 1-month MCLR unchanged at 8.15 per cent and 8.35 per cent, respectively.
MCLR, which was introduced by the Reserve Bank of India (RBI) in 2016, is a benchmark interest rate set by the RBI that banks use to determine their lending rates. Banks cannot give loans below this rate. While deciding on loan rates, banks use MCLR and add spread.
When MCLR increases, it leads to higher interest rates on loans linked to this rate, causing borrowers to face higher EMIs and increased overall borrowing costs. This hike reduces disposable income and can deter new borrowing, impacting personal finances and business investments.
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