Bank of Baroda, Indian Overseas Bank hike lending rates; SBI also nudges up its deposit rates

Bank of Baroda and Indian Overseas Bank have increased their marginal cost of fund-based lending rates (MCLR), following a hike in the interest rates on loans and deposits by their largest public sector peer State Bank of India. The latest hikes in the interest rates come days after the Reserve Bank of India (RBI) on February 8 increased the borrowing costs by 25 basis points (bps).

The RBI’s six-member Monetary Policy Committee had raised the benchmark repurchase or repo rate to 6.50% in its latest bi-monthly policy review. This was the sixth straight increase in interest rates since May last year, and the cumulative hike now totals 250 bps.

State-owned Bank of Baroda (BoB) has increased its MCLR by 5 bps across all tenors from February 12. The bank has revised one-year MCLR to 8.55% from 8.5%. The overnight, one-month and three-month MCLRs stand at 7.9, 8.2 and 8.3%, respectively, according to its website.

Another state-run lender Indian Overseas Bank (IOB) has raised its MCLR by up to 15 bps across all tenors. Its one-year MCLR is up to 8.45% from 8.30% now. Similarly, one-month, three-month and six-month MCLRs are up by 15 bps to 7.9, 8.2 and 8.35%, respectively, while its overnight, two-year and three-year MCLRs have been revised upwards by 10 bps.

Both the banks have not increased their deposit rates yet. SBI on Wednesday increased the MCLR-linked loans by 10 bps across the overnight and up to three year category of loans – varying from 7.95% to 8.70%.

The nation’s largest lender also increased deposit rates by 5-25 bps effective February 15. With the revised rates, senior citizens will get 8.5% on deposits of over five years, while others will get 5 bps more on three year funds and 25 bps on longer-term funds.

However, the rate hikes by SBI, BoB and IOB are only for corporate borrowers as the increases are applicable to loans linked to MCLR.