Axis Bank Hikes Lending Rates By 10 Basis Points Across Tenures; Read To Know More

Axis Bank, a private lender, has increased the marginal cost of funds-based lending rates (MCLR) by 10 basis points (bps) across all MCLR tenors. According to the Axis Bank website, the new rates went into effect on February 19, 2023. Overnight, the MCLR rate has been raised by 10 basis points to 8.70% — which was 8.60% earlier in January.

The three-month MCLR has been raised from 8.70% to 8.80%. The six-month MCLR, for example, has been revised to 8.85 percent from 8.75 percent, according to the lender. The six-month MCLR has been revised to 8.85 percent from 8.75 percent. The bank announced that the one-year maturity rate will be increased to 8.90% from 8.80%. The rate for two and three years maturity has been raised to 9.00% and 9.05% respectively, from 8.90% and 8.95% previously.

How does the rise in MCLR rates affect the general public?

If a borrower takes a loan against the MCLR, the increase will make the EMI or Equated Monthly Installment outgo more expensive. All types of loans, including floating-rate home loans, personal loans, car loans, and so on, that are linked to the MCLR may become more expensive. The interest rate on these loans will rise.

The MCLR is the lowest rate at which a bank can lend to its customers, so the 10 basis point increase will make consumer, auto, and home loans more expensive for borrowers. The increase comes just days after the central bank announced a 25 basis point repo rate hike to 6.5 percent on February 8, the highest since 2018, to bring inflation closer to its target.

The monetary policy committee (MPC) of the Reserve Bank of India (RBI) kept the policy stance of “withdrawal of accommodation” unchanged. The decision was not unanimous, with four of the six MPC members voting in favor of the rate increase. Jayanth Varma and Ashima Goyal voted against the increase.

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