BOB and ICICI Bank raise retail lending rates by 40 basis points following RBI action

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Public sector lender Bank of Baroda (BoB) raised the lending rate on loans, including home and car, by 40 basis points after the Reserve Bank of India raised the political repo rate by 40 basis points at 4.4%.

Retail lending rates are externally benchmarked.

Mumbai-based BOB has also withdrawn interest rate subsidies available for home and car loans that were introduced to boost retail credit. For home loans, interest rate concessions were introduced last month and for car loans they started at the beginning of this week. The concessions were halted in light of a hike in the political repo rate, bank officials said.

The BOB had introduced the Baroda Repo Linked Lending Rate (BRLLR) for all retail lending from 1 October 2019. The BRLLR is now 6.90% – the current RBI repo rate of 4.40% plus a markup 2.50%.

The external benchmark lending rate (I-EBLR) of private lender ICICI Bank is also revised by 40 basis points to 8.1%. However, the marginal cost of funds-based lending rate (MCLR) remained unchanged in May. The MCLR varies between 7 and 7.25% depending on the reference duration, ranging from one night to one year.

Last month, the BOB had revised the lending rate based on the marginal cost of funds (MCLR) by 5 basis points on all maturities from April 12, 2022 due to the increase in the cost of funds. The one-year MCLR would be 7.35%, compared to 7.30% previously.

In case of BOB, the new mortgage rates would be between 6.90 and 8.25% linked to the borrower’s credit rating. In April, BOB cut the mortgage rate by 25 basis points to 6.5% until the end of June 2022 to push retail credit.

Auto loans would be available within a range of 7.4-10.65% tied to the borrower’s credit profile. On May 02, 2022, the bank had cut the lending rate on loans by 25 basis points to 7.0% to buy new cars.

The total retail loan portfolio increased by 11.13% year on year (YoY) to reach Rs 1,28,960 crore in December 2021.

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