Union Bank of India has raised the marginal cost of funds-based lending rate (MCLR) by 0.05 percent to 0.35 percent across tenors. As a result, the equated monthly installments (EMIs) will get expensive for those who avail loans benchmarked against the MCLR.
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What is the increase?
Post the revision, the rates on the bank's loans are in the range of 7.00-8.10 percent.
| Tenure | Previous loan rates | Revised loan rates |
| Overnight | 6.95% | 7% |
| One month | 7.10% | 7.15 |
| Three month | 7.30% | 7.35% |
| Six month | 7.50% | 7.55% |
| One year | 7.70% | 7.75% |
| Two year | 7.75% | 7.95% |
| Three year | 7.75% | 8.10% |
Who will be impacted?
As mentioned, EMIs will get expensive for those who take loans against the MCLR.
Many banks have raised their lending rates following a 140 basis points hike in repo rate by the Reserve Bank of India (RBI) so far this financial year. The central bank is expected to hike interest rates further to tame high inflation.
The Reserve Bank of India's norms require banks to review their lending rates every month based on the marginal cost of funds.
Generally, when RBI hikes the repo rate, it increases the cost of funds for banks. This means that banks will have to pay more for the money they borrow from RBI. Consequently, banks pass on the cost to borrowers by increasing their loan interest rates, making EMIs costlier.
As a result, both new and existing borrowers witness an increase in their loan interest rates.
First Published:Sept 12, 2022 9:48 AM IST
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