Middle-class borrowers and salaried households may face significant financial strain as several public sector banks across the country have raised loan interest rates following a 0.25 per cent repo rate hike by the Reserve Bank of India (RBI). Punjab National Bank (PNB), Indian Bank, and Bank of Baroda are among the major PSU banks that have raised their lending rates. These banks have increased their loan interest rates by up to 0.25 per cent, making loans expensive for borrowers.
Repo rate increased to 5.50 per cent
The RBI raised the repo rate by 0.25 per cent to 5.50 per cent on Wednesday. This is the first increase in over three years. The Reserve Bank has hinted at further repo rate hikes amid rising inflation and the rupee’s continued decline.
PNB increased RLLR from 8.10 per cent to 8.35 per cent
In an exchange filing, PNB said that it has increased its repo-linked lending rate (RLLR) from 8.10 per cent to 8.35 per cent, following the RBI’s repo rate hike. The new rate will take effect on October 8. However, PNB, the country’s second-largest public sector bank, said its marginal cost-based lending rate (MCLR) and base rate remained unchanged.
Indian Bank, Bank of Baroda, Bank of India and Indian Overseas Bank increased interest rates
Chennai-based public sector Indian Bank has also raised its repo-linked benchmark lending rate (RBLR) from 7.95 per cent to 8.20 per cent. According to the bank, the new rate will take effect on October 8. Bank of Baroda has raised its repo-based lending rate from 7.90 per cent to 8.15 per cent. Bank of India and Indian Overseas Bank have also raised their repo-based lending rate (RBLR) to 8.35 per cent. These new rates will be effective from October 8.
Private sector banks also made loans expensive
Private sector Tamilnad Mercantile Bank also raised its repo-linked lending rate from 8.25 per cent to 8.50 per cent. Other banks and financial institutions are also expected to increase their benchmark lending rates in line with the RBI’s decision.
The repo rate is the interest rate at which the RBI lends to banks. A repo rate increase typically makes it more expensive for banks to raise funds and can impact interest rates on new loans.
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