Axis Bank, one of India's largest private sector banks, has increased its Marginal Cost of Lending Rates (MCLR) by 10 basis points, following the Reserve Bank of India's decision to raise the repo rate. The increase in MCLR will take effect from February 19, 2023, and will affect customers who have taken out home, car, education, personal loans, and others.
The overnight MCLR of the bank has increased from 8.60 percent to 8.70 percent, while the 3-month MCLR has risen from 8.70 to 8.80 percent. The 6-month MCLR has increased from 8.75 percent to 8.85 percent. The one-year loan MCLR has risen from 8.80 percent to 8.90 percent, while the MCLR for 2 and 3 years has increased from 8.90 percent and 8.95 percent to 9.00 percent and 9.05 percent.
This decision comes after Kotak Mahindra Bank also increased its MCLR by 5 basis points, with the new rates taking effect from February 16, 2023. The Reserve Bank of India had increased the repo rate by 25 basis points on February 8, 2023, to control rising inflation in the country. Consequently, many banks, including State Bank of India, Bank of Baroda, and Punjab National Bank, have increased their loan and fixed deposit interest rates.
The increase in MCLR means that customers will have to bear the burden of a higher Equated Monthly Instalment (EMI) on their loans. MCLR is the minimum rate at which the bank offers loans to its customers, and if a bank increases MCLR, the loan interest rates automatically increase. The introduction of MCLR by the Reserve Bank of India in 2016 was intended to bring more transparency and fairness in lending rates, based on the actual cost of funds.
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