BoB raises MCLRs by 5 bps

Bank of Baroda (BoB) followed larger rival Punjab National Bank (PNB) in lending rate hikes, raising its marginal cost of funds-based lending rates (MCLRs) by five basis points (bps) across tenors on Thursday. The revised rates will come into effect on Saturday.

BoB’s one-year MCLR now stands at 8.5%. MCLRs for other tenures range between 8% and 8.35%. “The increase is attributed to higher cost of fund and rising interest rate scenario,” the bank said in a release.

Earlier this week, PNB, the country’s second-largest public-sector lender, had raised its MCLRs by 5-10 bps for the month of July. The one-year MCLR at PNB now stands at 8.6%, up five bps from earlier.

Last month, State Bank of India (SBI), HDFC Bank, ICICI Bank, Punjab National Bank (PNB), Bank of Baroda, Housing Development Finance Corp (HDFC), Axis Bank, Kotak Mahindra Bank, Union Bank of India, Indian Bank and Karur Vysya Bank had raised MCLRs amid a situation of tight liquidity in the system. Some of them took the rate decision following Reserve Bank of India’s (RBI) 25-bp repo-rate hike on June 6.

The hardening of bond yields in the last few months have allowed banks some elbow room to raise lending rates.

After almost four years, banks are once again the preferred port of call for borrowers as interest rates in the bond markets harden. Yields on AAA-rated bonds have moved up to levels of 8.4%; that’s a shade higher than SBI’s one-year MCLR of 8.25% and at par with that of HDFC Bank and ICICI Bank.

Bank Of Baroda