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Loan EMIs to become costlier as leading bak hikes lending rates: Details

Mumbai: Leading private sector bank in the country, HDFC Bank has hiked its  marginal cost of funds-based lending rate (MCLR). The key lending rate is hiked  by up to 10 basis points.

The  overnight MCLR, 1-month MCLR, 3-month MCLR and 6-month MCLR have been hiked by 10 points, the 1-year MCLR, that is mostly linked to number of consumer loans have been hiked by 5 basis points from 9.25 percent to 9.30 percent. Meanwhile the bank has kept the 3-year MCLR unchanged at 9.35 percent.

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MCLR is the minimum rate of interest banks are allowed to give out loans to its customers. It is a benchmark interest rate and it dictates the lower limit of the interest rate for a loan.

Meanwhile, the  Reserve Bank of India (RBI) has decided to keep the repo rates unchanged at 6.5%.This is for sixth consecutive time  that RBI is keeping the key lending rate unchanged. RBI Governor Shaktikanta Das announced this after the Monetary Policy Committee (MPC) meeting of the apex bank.

Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Usually authorities use this key lending rate as a weapon to combat inflation. If inflation rises, then apex banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in reducing inflation.

 

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