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Home loans and in consequence equated monthly instalment payments (EMIs), will be impacted by the hike in lending rates.

After the Reserve Bank of India’s (RBI’s) hiked the repo rate last week, various other banks, including the India’s largest lender State Bank of India (SBI), have also increased lending rates. RBI had increased rate by 50 basis points (bps) to 5.9 per cent on September 30.

According to SBI’s website it has raised its external benchmark-based lending rate (EBLR) by 50 bps to 8.55 per cent and repo rate-linked lending rate by almost similar margin to 8.15 per cent. The changes are with effect from October 1.

Home loans and in consequence equated monthly instalment payments (EMIs), will be impacted by the hike in lending rates.

At the same time, private sector giant ICICI Bank too has increased its EBLR to 9.25 per cent (effective from 30 September). Also, it has increased its marginal cost of funds-based lending rate (MCLR), on the lines of RBI. The MCLR of private bank has been revised to 7.85-8.1 per cent across tenures, with effect from 1 October.

Since 1 October 2019, all banks made the transition to a regime of linking interest rates to an external benchmark.

The repo rate or yield on treasury bills issued by the central government form part of the external benchmarks. The RBI also took the step to accelerate better transmission of its interest-rate decisions.

Following the RBI’s decision, YES Bank has also increased its MCLR. Its rates after revision, for overnight to one-year tenures now stands between 8.2-9.65 per cent, with effect from October 1.

YES Bank on its website said, “The RBI repo rate applicable is 5.4 per cent, from October 1. Rate applicable for prevailing loans linked to the six-month certificate, is 6.79 per cent with effect from 1 October 2022.”

There has also been increase in MCLR of the State-owned lender Bank of India. The overnight MCLR has been hiked by 10 bps to 6.95 per cent. The one-year MCLR has been increased by 10 bps to 7.8 per cent, whereas the three-year MCLR has been hiked by 20 bps to 8 per cent.

HDFC being heavyweight lender in private sector has also hiked its interest rates on retail prime lending rates effective October 1. It hiked rates by 50 bps on similar lines of RBI. The increased rates will reflect on monthly EMIs for borrower from the next reset date.

The bank’s credit growth stood at 16.2 per cent year-on-year recording a nine-year high on 9 September. However, during same timeline, deposit growth stayed low at 9.5 per cent.