Interest rates are inching up with more banks joining the rate hike bandwagon. After SBI, HDFC Bank and ICICI Bank hiked their marginal cost of funds based lending rate (MCLR) by 5 to 20 basis points earlier this month, now others like IndusInd Bank has announced new MCLR rates.
MCLR is the minimum interest rate, below which a bank is usually not permitted to lend. Higher rates mean that borrowers like you will have to pay more on their loans and mortgages.
Effective September 17, IndusInd Bank’s marginal cost of funds based lending rate for overnight is 9.00%, for 1 month 9.05%, for 3-month 9.35%, for 6-month 9.60% and for 1-year 9.65%. For longer tenures like two year (9.70%) and three year (9.75%), the rates are higher.
HDFC Bank and SBI hiked their respective MCLR by 20 basis points or 0.20%. One basis point is equal to 0.01%. Even, Bank of Baroda and Union Bank of India have hiked rates. SBI’s one-year MCLR is up 8.45%.
Punjab & Sind Bank with effect from September 16 announced new MCLR rates. At Punjab & Sind Bank, overnight MCLR is now 8.00%, 1-month MCLR 8.20%, 3-month MCLR 8.40%, 6-month MCLR 8.50%, 1-year MCLR 8.80% and 3-year MCLR 9.10%.
Smaller banks like Lakshmi Vilas and Vijaya Bank have also announced higher MCLR a few days ago.
A 50 bps increase signified that home loan borrowers would shell out an additional Rs 1,500/month on a Rs 50 lakh loan for a 10-year tenure.
MCLR replaced the previous base rate system. It was implemented by the RBI on April 2016, to determine the rates of interests for advances. The MCLR calculation takes into account the additional or incremental cost of arranging additional funds. MCLR is calculated based on the marginal cost of funds instead of the overall cost of funds.