Bank Loan Rates: Following the RBI’s decision on Wednesday to hike the repo rate by 0.25 per cent, numerous banks have raised their loan interest rates. This move has surprised customers. Notably, banks such as PNB, Indian Bank, and Bank of Baroda have announced increases of up to 0.25 per cent in their lending rates. Consequently, customers borrowing from these banks will now face higher interest rates.
Current Repo Rate
Following the RBI’s 0.25 per cent hike, the repo rate now stands at 5.50 per cent. This marks the first such increase in four years, as the rate had remained stable during that period. The RBI’s decision aims to curb inflation.
PNB Raises RLLR
In a filing with the stock exchange, PNB announced that, following the RBI’s repo rate hike, it has raised its Repo Linked Lending Rate (RLLR) from 8.10 per cent to 8.35 per cent. These new rates came into effect on October 8. However, PNB—the country’s second-largest public sector bank—clarified that it has not made any changes to its MCLR or base rate.
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Other Banks Also Raise Rates
Public sector lender Indian Bank has also raised its Repo-Linked Lending Rate (RBLR) from 7.95 per cent to 8.20 per cent; these new rates are effective from October 8. Meanwhile, Bank of Baroda has increased its RBLR from 7.90 per cent to 8.15 per cent. Additionally, Bank of India and Indian Overseas Bank have set their RBLR (Repo Linked Lending Rate) at 8.35 per cent. These rates come into effect today.
Private Sector Raises Loan Interest Rates
It is worth noting that the private sector’s Tamil Nadu Mercantile Bank has also raised its repo-linked lending rate (RBLR) from 8.25 per cent to 8.50 per cent. Other banks and financial institutions are also likely to increase their benchmark lending rates in line with the RBI’s decision.
What is the repo rate?
The repo rate is the interest rate at which the RBI lends money to banks. An increase in the repo rate makes borrowing more expensive for banks and raises the cost of loan repayments; this change can, in turn, impact interest rates on new loans.