Bank of Baroda hikes MCLR up to 30 basis effective December 12

Public sector lender Bank of Baroda (BoB) has decided to increase its marginal cost of funds-based lending rate (MCLR) by up to 30 basis points (bps) across tenors. This hike by the Mumbai-based lender is steeper than compared upto 15 basis points upward revision made in November 2022.

The revised rates will be effective from December 12, 2022, BoB said in filing with BSE.

The benchmark one-year tenor MCLR has been raised by 25 basis points to 8.30 per cent. Last month it had hiked the rate by 10 basis points. The three-month MCLR has been raised to 8.05 per cent from 7.75 per cent in November. Among others, the overnight rate has been raised to 7.50 per cent from 7.25 per cent earlier. The six-month MCLR stands revised to 8.15 per cent from 7.90 per cent in November, BoB said.

This hike reflects the increase in cost of money as banks jack up term deposit rates to attract funds to meet credit demand. Its cost of deposits rose to 3.90 per cent at the end of the September 2022 quarter from 3.84 per cent a year ago.

According to Reserve Bank of India data on the deposit side, the weighted average domestic term deposit rate on fresh and outstanding deposits increased by 150 basis points and 46 basis points respectively during May-October 2022. This reflects the effect of monetary tightening through the withdrawal of excess liquidity and hike in the policy repo rate.

The rise in MCLR is going to impact corporate borrowers. Retail lending – housing, personal credit and SMEs – is predominantly linked to external benchmarks like policy repo rate.