Banks Hike Lending Rates in August 2023

Banks Hike Lending Rates in August 2023

Several major banks in India have hiked their lending rates in August 2023, following the Reserve Bank of India’s (RBI) decision to keep the repo rate unchanged.

The public sector lender Canara Bank has hiked its MCLR by 5-10 basis points across all tenures, with effect from August 12. The overnight MCLR stands at 7.95%, while the one-month MCLR is 8.05%. The six-month MCLR is 8.50, while the three-month MCLR is 8.15%. The bank’s MCLR for a 1-year tenor is 8.70%.

HDFC Bank has also hiked its MCLR by 15 basis points on select tenures, with effect from August 7. The one-month MCLR has gone up to 8.45% from 8.30%, while the three-month MCLR has increased to 8.70% from 8.60%. However, the six-month MCLR has only been raised by 5 basis points to 8.95% from 8.90%. MCLRs during tenures of more than a year, however, are not changing.

Bank of Baroda (BoB) has hiked its benchmark lending rates by 5 basis points (bps) on various tenures. The new rates will come into effect from August 12th.

ICICI Bank, Punjab National Bank, and Bank of India have also revised their marginal cost-based lending rate (MCLR) on loans. The revised interest rates are effective from 1 August, as per the bank websites.

Here is a table of the lending rates of HDFC Bank, ICICI Bank, and Canara Bank after the latest hikes:

The RBI’s decision to keep the repo rate unchanged is a sign that it is not yet concerned about inflation. However, the hikes in lending rates by banks are a signal that they are expecting inflation to rise in the coming months. This is likely to impact borrowers, who will have to pay higher interest rates on loans such as home loans, car loans, and personal loans.

The hikes in lending rates are a sign that the RBI is serious about taming inflation. However, it is also a reminder that borrowers are likely to face higher borrowing costs in the coming months.

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How will the hike in lending rates impact borrowers?

The hike in lending rates will impact borrowers in two ways:

Higher monthly EMIs:

When banks hike interest rates, they pass on the cost to borrowers in the form of higher EMIs. This means that borrowers will have to pay more every month for their loans.

Increased tenure:

Banks may also offer borrowers the option to increase the tenure of their loan instead of raising the monthly EMI. This will reduce the monthly EMI, but it will also mean that borrowers will have to pay more interest over the life of the loan.

What can borrowers do to mitigate the impact of the hike in lending rates?

There are a few things that borrowers can do to mitigate the impact of the hike in lending rates:

Refinance their loan

If borrowers have a floating-rate loan, they may be able to save money by refinancing to a fixed-rate loan. This will lock in the interest rate for the life of the loan, so borrowers will not be affected by future rate hikes.

Increase their monthly EMI

Borrowers can also choose to increase their monthly EMIs. This will help to reduce the overall interest paid on the loan.

Shorten the tenure of the loan

Borrowers can also choose to shorten the tenure of their loan. This will increase the monthly EMI, but it will also reduce the overall interest paid on the loan.

The hike in lending rates is a setback for borrowers, but there are steps that they can take to mitigate the impact. Borrowers should carefully consider their options and choose the option that best suits their financial situation.