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With RBI moving to rising rate cycle, banks hike RLLR


Several banks have raised their repo rate-linked lending rates (RLLR) after the Reserve Bank of India (RBI) on Friday increased the repo rate by 50 basis points (bps) to 5.40 per cent.

Public sector lenders including Bank of Baroda (BoB), Punjab National Bank (PNB), Union Bank of India, as well as private sector ICICI Bank on Saturday raised their RLLRs.

Following the hike, BoB’s RLLR stands at 7.95 per cent, with 5.40 per cent as RBI repo rate and a mark-up of 2.55 per cent. The new RLLR will be effective from Saturday. PNB has increased its RLLR from 7.40 per cent to 7.90 per cent, while Bank of India’s RLLR stands at 8.25 per cent, with effect from Friday.

Bank of Maharashtra’s RLLR will stand at 7.70 per cent from August 10 and Union Bank of India’s external benchmarked lending rates (EBLR) stands at 7.70 per cent, effective August 11.

ICICI Bank’s EBLR, which is pegged to the RBI repo rate, stands at 9.10 per cent.

RLLR is linked to or is based on the repo rate and is revised every time the RBI changes policy rates. With the RBI moving into a rising rate cycle, banks too have started raising their lending rates, both externally benchmarked and marginal cost of funds-based (MCLR). Since April, the RBI has increased the repo rate by 140 bps in three tranches.

As the transmission of monetary policy takes place more effectively under the EBLR regime, banks are opting to switch to the system. As per RBI data, the share of loans under the EBLR-based system, for all banks, has increased to 39.2 per cent in December 2021 from 28.6 per cent in March.

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The immediate increase in RLLR or EBLR by banks and a comparatively delayed increase in deposit rates augurs well for their margins. In addition to the RLLR, banks are also increasing their MCLR. ICICI Bank, PNB, Yes Bank and Bank of India also raised their MCLR by 10-15 bps before the RBI policy decision.

While banks revise RLLR whenever there is a change in repo rate, MCLR is revised by lenders every month. Other lenders like Housing Development Finance Corporation (HDFC) and LIC Housing Finance have also increased their retail prime lending rate (RPLR) on home loans.  WITH FE





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