These two public sector banks made loan interest rates expensive, increased by 20 basis points in one stroke
The lending rate of Bank of Baroda has already increased to 7.50 percent. This new rate has come into effect from June 12, 2022. Similarly, Union Bank of India has also increased its MCLR or lending rate. The new rate has become 7.45 percent.
Two major public sector banks of the country have reduced their MCLR (MCLR) has been increased. These two banks are Bank of Baroda and Union Bank of India ,Union Bank Of India, Here MCLR stands for ‘Marginal Cost of Funds Based Lending Rates’. Simply put, MCLR is the rate below which a bank cannot give loan to its customer. The increase in MCLR has happened because the Reserve Bank has increased the repo rate under the policy rates.
The Reserve Bank argues that by increasing the repo rate, inflation can be controlled like Sursa. Banks say that since their entire loan system is based on the repo rate. Therefore, by increasing the repo rate, they will have to increase the MCLR or lending rate. The lending rate will be the rate at which the customer gets the lane. To understand it in simple language, due to increase in the lending rate, all types of retail loans such as home loan, personal loan or auto loan will become expensive.
The lending rate of Bank of Baroda has already increased to 7.50 percent. This new rate has come into effect from June 12, 2022. Similarly, Union Bank of India has also increased its MCLR or lending rate. Union Bank’s one-year MCLR has been fixed at 7.45 percent. The new rate of this bank has been implemented from June 11, 2022. If you are a customer of these banks, then home loan or personal, auto loan will become expensive already. The EMI of your house will increase slightly as compared to earlier. This will put another burden of inflation on your pocket.
Union Bank’s MCLR
If a person takes a loan for 1 night, then his MCLR or lending rate will be 6.70 percent. MCLR of 1 month loan is 6.85, 3 month lending rate 7.10, 6 month loan lending rate 7.25, 1 year lending rate 7.45, 2 year MCLR 7.50 and 3 year loan has been fixed at 7.50 percent.
MCLR of Bank of Baroda
The lending rate of one night loan is 6.80 percent, for 1 month the lending rate is 7.20 percent, for 3 months the lending rate is 7.25 percent, for 6 months the lending rate is 7.35 percent and for one year the MCLR has been fixed at 7.50 percent.
What will happen if MCLR increases
Now the question is what will happen due to increase in MCLR or lending rate. So the answer is that your pocket will be loose. You will have to pay more EMI of the loan as compared to earlier. This can affect your salt-oil budget. The money that should be spent on salt-oil, that money will now be filled in the form of additional EMI. Banks fix the interest rates of customers’ loans on the basis of their MCLR or lending rate.
Your pocket will be loose like this
The lending rate will decide how much interest rate will be charged for home loan of 30 lakh, 50 lakh or 75 lakh. Overall, the earnings of banks will increase and your expenditure will increase. Banks usually fix the rate of MCLR for one year. The issue of interest on loan is not only about MCLR. Rather, banks charge interest from their customers by adding margin charge to MCLR.
Only RBI can do
Now if the customer wants that his pocket is less loose, the loan EMI does not gallop, then only the Reserve Bank can do some good for it. Actually, as soon as the Reserve Bank increases the repo rate, all the banks start increasing the MCLR by standing in the queue. On June 8, the Reserve Bank raised the benchmark interest rate by 50 basis points in one stroke. In such a situation, there is no other option left before the banks. Top companies like ICICI Bank and HDFC Bank have increased the lending rate. Now the remaining banks are also participating in this. Loan inflation will stop only when the Reserve Bank stabilizes the repo rate.