Axis Bank hikes MCLR rates across tenors by 25 bps

19 Oct 2022 , 10:13 AM

The marginal cost of funds-based lending rates (MCLR) at Axis Bank has been raised by 25 basis points across all tenors, the bank announced on Tuesday. The benchmark one-year MCLR will increase by 25 basis points to 8.35 % with effect from October 18, 2022, according to a notification on the website of the third-largest private sector lender in the nation.

The increase in MCLR rates by Axis Bank comes after peer lenders raised lending rates in response to the Reserve Bank of India’s (RBI) 50 basis point increase in the repo rate on September 30. Prior until now, Axis Bank charged 8.10% on the benchmark one-year MCLR rate, which is used by lenders to determine the pricing of the majority of consumer loans like those for personal, auto, and home use.

The new rates range from 8.15 to 8.30 %, up 0.25 % apiece, for tenors ranging from overnight to one, three, and six months. The MCLR for two years is 8.45 %, while the MCLR for three years is 8.50 %. According to Axis Bank, these rates will be in effect until the next review. SBI, Federal Bank, and Kotak Mahindra Bank had increased the MCLR rates the day before.

In addition to raising their MCLR rates, banks also immediately increased their external benchmark repo-linked lending rates by 50 basis points in reaction to the RBI’s repo rate action last month. At this time, the repo rate is 5.90%. RBI has increased the repo rate by a total of 190 basis points since May of this year. Loans are becoming more expensive for customers as a result of rising MCLRs and repo-linked lending rates. At this time, the repo rate is 5.90%. RBI has increased the repo rate by a total of 190 basis points since May of this year.

For better transmission of rate changes, all banks switched to interest rates that are tied to an external benchmark starting on October 1, 2019, such as the Treasury Bill yield or the repo rate of the RBI. The previous rates were derived from MCLRs, which were dependent on variables such as deposit rates, repo rates, operating costs, and the cost of maintaining the cash reserve ratio (CRR).

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