RBL Bank Witnesses Hike In Loan Rates After Increase In MCLR Across Tenors

RBL Bank, a private lender, increased its marginal cost of funds-based loan rates (MCLR) across tenures by 20 basis points. Beginning on February 22, 2023, the new MCLR rates have been enforced for their customers. Term loans tied to MCLR will likely see an increase in interest rates, as a result of a rise in MCLR rates. Equated Monthly Installments (EMIs) for a range of loan products at RBL Bank such as personal loans and mortgages could also go up for both existing and new customers.

Currently, RBL Bank offers overnight MCLR at an interest rate of 8.95%, as well as MCLR rates for one month, three months, six months, and one year. The official website of RBL Bank Limited said: “All rupee loans sanctioned and credit limits renewed (other than exceptions permitted by RBI) will be priced concerning the tenor-based MCLR as mentioned above.”

Borrowers’ interest rates will change according to the MCLR in effect from the restart date. It is because a new rate of MCLR will be sanctioned that will also change the rate of borrowing for the customers. Borrowers will observe an increase in their EMIs on their MCLR-linked loan products on the following restart date, as a result of the RBL bank raising MCLR by 20 basis points across tenures. RBL Bank, a private lender, declared a net profit of Rs 208.97 crore for the December 2022 quarter, an increase of 33%. At the same time last year, it was Rs 156.1 million. In comparison to the same quarter last year, the third quarter’s net interest revenue increased by 14% to Rs 1,148 crore.

Now, let’s know more about MCLR.

The MCLR, established by the Reserve Bank of India, serves as a benchmark rate for institutions internally. It aims to make it easier to determine the lowest interest rate for the different types of loans that banks provide. Simply stated, the minimum permitted lending rate, or MCLR is the rate at which banks may offer loans to their clients.

The RBI introduced MCLR rates in 2016, effectively replacing the base rate system that had been in use up until that time. Its main objective was to maintain a balance between the interests of the banking industry and the distribution of interest rate benefits from the RBI’s monetary policy to debtors.

Benefits

The MCLR enables the RBI to notify borrowers of interest rate changes quickly. It makes it possible for borrowers to take advantage of the rate reduction.

Using the present MCLR rate, banks continue to enjoy the trust of clients and businesses in the banking sector. Lending rates are kept transparent through calculations based on the minimum loan rate, and more people and businesses are turning to banks for their credit requirements.

By using the MCLR to standardise the benchmark rates across all tenors and thereby provide a consistent interest rate framework, the RBI has improved the process for pricing credit.

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