Canara Bank Raises MCLR Rates; How much will EMIs for home loans and car loans increase? Check here
According to its website, India’s third-largest public sector lender, Canara Bank, has raised its marginal cost of lending rate, or MCLR, on all maturities. The MCLR, a key point for deciding loan interest, was raised by up to 15 basis points, the Punjab National Bank said. The new PNB MCLR tariffs came into effect from Wednesday 7 September.
Canara Bank’s MCLR rate hike comes more than a month after the Reserve Bank of India raised its repo rates again by 50 basis points, to further calm inflation which has remained above the limit central bank’s 6% upper tolerance. Banks raise or lower their lending rates based on RBI repo rates.
The revised marginal cost of funds-based lending rate (MCLR) across different tenors would take effect from Wednesday, the lender said in a regulatory filing.
The one-year benchmark MCLR will be 7.75% from the current rate of 7.65%. The one-year rate is used to fix most consumer loans such as auto, personal, and home loans.
The one-day and one-month MCLR are up 0.10% each, while the three-month tranche rose 0.15% or 15 basis points to 7.25%. The rise is in line with other peers after RBI raised its key rate last month. Last week, the Punjab National Bank also raised its MCLR rates.
Here is the MCLR by tenor in effect as of September 7, 2022, according to the Canara Bank website:
Overnight: old rate — 6.80%; New rate — 6.90%
One month: old rate — 6.80%; New rate — 6.90%
Three months: old rate — 7.10%; New rate — 7.25%
Six months: old rate — 7.60%; New rate 7.65%
One year: old rate — 7.65%; New rate 7.75%
Following the National Bank of Punjab’s MCLR rate hike, housing, vehicles and personal loans will become more expensive as EMIs increase. However, existing home loan borrowers should note that the EMI will only be reviewed when their loan reset date arrives. The lender will increase or revise the interest rate on borrowers’ home loans based on the MCLR in effect when the reset date arrives. This means that if a person’s home loan is based on the MCLR and the reset date is in December, they will have to pay the increased EMIs from December. Until then, the borrower will pay based on their existing rates.
To control inflation, the Reserve Bank of India (RBI) raised the key repo rate by 50 basis points (bps) in early August. Since May this year, the RBI has raised its repo rates by 140 basis points. Inflation has subsided since then, but remains above the RBI’s upper tolerance limit. The RBI raised the repo rate, at which the central bank lends to banks, by 50 basis points to 5.4%.
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