Bank of Baroda increases lending rates by 10 basis points

Bank of Baroda, India’s second biggest bank by assets, raised its lending interest rate by 10 basis points across all tenures up to one year.

With this, the one-year marginal cost of funds based lending rates or MCLR has been raised to 8.4% from 8.3% with effect from tomorrow, Apr 7.

The six-month rate has been increased to 8.25% and the three-month rate to 8.05%.

The move comes three days after Karnataka Bank increased its one-year MCLR to 8.8% from 8.75%.

Last month, State Bank of India, ICICI Bank and HDFC Bank too had increased lending rates.

HDFC Bank’s one-year MCLR is at 8.3%.

MCLR is calculated using the cost of money for the bank at any point of time, while the ‘base rate’ is calculated as an average cost of money over a period of time.

The Reserve Bank of India has made it necessary for banks in India to link their lending rates with the MCLR and not the base rate from Apr 1 this year in an effort to pass on the lower cost of borrowing to loan customers.

India is currently on a interest rate down-cycle from a high of around 10-11% three years ago.