Private sector lender Kotak Mahindra Bank on Thursday raised its marginal cost of funds based lending rates (MCLR) for June by 20 to 25 basis points (bps). The bank has hiked its one-year MCLR by 20 bps to 7.85%, as per information on the bank’s website.
This is the sixth consecutive increase in one year MCLR by the bank, which started raising lending rates since the beginning of the calendar year. In January, the bank raised MCLR by five bps to 7.25% and continued raising the lending rate by five bps till April. The increase in the lending rates has been steeper in May and June after the Reserve Bank of India raised policy repo rate two times in a row.
Since the RBI initiated the rising policy repo rate cycle in order to control inflation, most banks have raised their loan rates based on both, external benchmark and cost of funding. Among private banks, ICICI Bank and HDFC Bank have raised their cost-based lending rates for June by 30 to 35 bps. ICICI Bank’s current one-year MCLR stands at 7.55% while that of HDFC Bank is at 7.85% same as Kotak Mahindra Bank.
Top public sector banks such as State Bank of India (SBI), Bank of Baroda and Union Bank of India have also made upward revision in their MCLR. SBI has raised one-year MCLR by 20 basis points to 7.40%. Currently, Bank of Baroda and Union Bank have set one-year MCLR for June at 7.5% and 7.45% respectively.
Banks have also increased repo rate linked lending rates after the RBI raised policy repo rate by 90 bps in two tranches. Most banks have shifted to the external benchmark based lending rates (EBLR) setting lending rates for personal loans, retail loans and home loans. The RBI earlier had said that the transmission of policy rates takes place more effectively under the EBLR regime as the banks’ lending rates are tied to the external benchmark. On the other hand, banks revise their MCLR on a monthly basis, which is why the impact is slower.
The share of loans under the EBLR-based system, for all banks, has increased to 39.2% in December 2021 from 28.6% in March, as per RBI data. For Kotak Mahindra Bank, of the total floating rate book, the share of EBLR-linked loans is 48% and that of MCLR-linked loans is 18%, the bank management had said in an analyst call.