Indian Overseas Bank Increases MCLR, EMIs to Get Costlier; Details

Indian Overseas Bank has hiked the marginal cost of funds (MCLR) by 15 to 35 basis points across tenures. The new rates are set to come into effect on December 10. The MCLR hike by the public sector banker follows the recent revision in the repo rate by RBI in its December 2022 bi-monthly monetary policy. The hike in MCLR by IOB is likely to cause the term EMIs to go up.

The bank has hiked the 1-year MCLR by 20 basis points to 8.25 per cent from the current 8.05 per cent. Similarly, the 2-year MCLR will now be 8.35 per cent following the 25 basis point. The 3-year MCLR rate will move to 8.40 per cent from the current 8.10 per cent following the 30 basis point.

For short-term borrowings of 6 months, the MCLR has been increased by 20 basis points, taking up to 8.15 per cent. The new MCLR for borrowings for three months will be 8 per cent after a 15 basis point. For borrowing with a tenure of 1 month, the MCLR has been hiked by 20 basis points to 7.70 per cent.

The Monetary Policy Committee of RBI hiked the repo rate by 35 basis points (bps) to 6.25 on Wednesday, December 7. This is the fifth repo rate hike in 2022. However, the recent hike is lower compared to the 50 bps increase each in the previous three policy reviews. In its off-cycle monetary policy review in May this year, RBI announced a 40-bps hike in repo rates.

“The global economy is still marred by uncertainty… As per IMF, one-third of the economies will contract this year or the next year. However, the Indian economy remains resilient… bank credit is growing in double digits… yet inflation remains elevated as in other countries,” Governor Shaktikanta Das said while presenting the latest bi-monthly monetary policy statement.

The latest hike takes the total hike in the key policy rate this year to 225 basis points, taking it to the highest level since August 2018.

The repo rate is the interest rate at which the RBI lends to the commercial bank. The hike is part of the central bank’s effort to tame inflation in the country.

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