It isn’t great news for home- and car-buyers seeking financing support after the Reserve Bank of India raised the benchmark repo rate on Wednesday by 25 basis points to 6.5 percent.
Pre-empting the regulator’s move to raise the headline rate, at least three banks — Union Bank of India, Kotak Mahindra BankNSE -2.48 % and Karnataka bankNSE -1.49 % — increased their marginal cost of lending rates (MCLR) by 5-10 basis points. The largest mortgage loan providers such as State Bank of India (SBI), ICICI BankNSE -0.25 % and Punjab National Bank kept their MCLR rates unchanged. On July 31, SBI had raised the term deposit rates on select maturities by 5-10 basis points.
With the policy rate increase expected to get transmitted with a lag, customers will have to brace themselves for much higher rates in the future.
On Wednesday, Union Bank of India raised its one-year MCLR by 10 basis points to 8.55 percent while Kotak Mahindra Bank raised its one-month and three-month rates by 5 basis points to 8.20 percent and 8.55 percent, respectively. It kept its one-year rates unchanged at 8.95 percent.
Banks have been on a rate increasing spree after the central bank raised its repo rate in June this year after a gap of four years. The last time the central bank had effected consecutive rate increases was in October 2013.