Loan EMIs may rise as seven banks revise their lending rates following the Reserve Bank of India’s 25-basis-point repo rate hike, increasing borrowing costs for customers from October 8.
The RBI raised the repo rate to 5.50% and shifted its policy stance from neutral to calibrated tightening.
The move has prompted several lenders to revise benchmark-linked lending rates, making some loans more expensive for borrowers.
Loan EMIs May Rise After Rate Revisions
Punjab National Bank has increased its Repo Linked Lending Rate (RLLR) from 8.10% to 8.35%, while keeping its MCLR and Base Rate unchanged.
Indian Bank has raised its Repo Linked Benchmark Lending Rate (RBLR) to 8.20% from 7.95%.
Bank of Baroda has also increased its Repo Based Lending Rate to 8.15% from 7.90%.
Bank of India has raised its Repo Based Lending Rate to 8.35%, while Indian Overseas Bank has increased its RBLR to 8.35%, effective October 8.
Tamilnad Mercantile Bank has also revised its Repo Linked Lending Rate to 8.50% from 8.25%.
HDFC Bank Lending Rate Change
HDFC Bank is also part of the latest lending-rate developments, but its move differs from the other lenders.
The bank reduced its Marginal Cost of Funds-Based Lending Rate by 5–15 basis points across various tenures, effective October 7.
Its revised MCLR now ranges from 7.75% to 8.55%.
The change is relevant mainly for borrowers whose existing loans are linked to MCLR, as their rates can change when the scheduled reset date arrives.
Most new retail loans, including many home loans, are linked to external benchmarks rather than MCLR.
Therefore, the impact of an MCLR revision depends on the type of loan and the benchmark to which it is linked.
Why Loan EMIs May Rise
For borrowers with loans linked to repo-based or other external benchmarks, an increase in the lending rate can translate into higher EMIs or a longer repayment period, depending on how the lender adjusts the loan.
The latest rate changes follow the RBI’s decision to increase the repo rate by 25 basis points.
The central bank said inflation risks had increased, while the change to a calibrated tightening stance indicates that future policy action could include another hike or a pause depending on economic conditions.
The RBI’s repo rate is an important benchmark for borrowing costs in the banking system.
When repo-linked lending rates rise, borrowers with floating-rate loans can see the impact through higher interest costs.
Other lenders may also revise their benchmark lending rates following the RBI’s policy decision.
Borrowers should therefore check their loan benchmark, current interest rate and reset terms to understand how any change could affect their monthly repayment.
