Bank Hikes MCLR; How much will EMIs for home loans and car loans increase?

Leading private lender Yes Bank raised its MCLR rates. The marginal cost of lending rate, or MCLR, a key point in deciding loan interest, has been increased, the bank said in a statement. Yes Bank’s new MCLR rates have already gone into effect, according to a note on the lender’s website. The move comes nearly a month after the Reserve Bank of India hiked its repo rates to 4.90% amid rising inflation in the country.

Yes Bank’s new MCLR rates went into effect July 1. Yes Bank’s MCLR rate hike will mean interest on loans for new and existing borrowers is expected to increase, including monthly equivalent payments (EMI) for home loans, auto loans and any other marginal cost related loans. This is a direct result of the RBI increasing its repo rates, as any change in the repo rate will also affect the marginal cost and therefore change the MCLR.

Yes, the Bank’s MCLR rates for one day, one month and six months have been raised to 7.60%, 7.90% and 8.25%. For six-month and one-year terms, Yes Bank’s MCLR rates are 8.70% and 8.95%, respectively.

Here is the MCLR by tenor in effect as of July 1, 2022, according to the Yes Bank website:

Overnight: New rate — 7.60%

A month: New rate — 7.90%

Three months: New rate — 8.25%

Six months: New rate — 8.70%

One year: New rate — 8.95%

Yes Bank’s base rate as of June 1 is 8.75%, the bank said on its website in a note. On the other hand, the rate of Yes Bank BPLR in force since July 26, 2011 is 19.75%, he added.

“As per RBI guidelines, all new personal or retail variable rate loans and MSME variable rate loans must be based on an external benchmark. Effective April 1, 2022, the Bank has moved from the 6-month Certificate of Deposit rate to the RBI Repo rate as the benchmark lending rate based on an external benchmark with an appropriate mark-up,” said Yes Bank on its website.

“The RBI Repo rate applicable from July 1, 2022 is 4.90%. The Bank will add spread elements in accordance with the Bank’s spread framework. For existing loans linked to the CD6m rate, the rate applicable from July 01, 2022 is 5.73%,” the lender added.

The MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum interest rate that banks are allowed to lend to their customers. It dictates the lower limit of the interest rate for a loan. This rate limit is immutable for borrowers unless otherwise specified by the Reserve Bank of India. With the increase in MCLR, the house of Yes Bank and other borrowers may not be satisfied as interest is most likely to increase.

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