Banks increase EBLRs by 190 bps in tandem with RBI's repo rate hike
The Hindu
The Reserve Bank of India (RBI) has hiked the key short-term lending rate (repo) by 190 basis points in four tranches since May to contain inflation.
All major banks have increased their external benchmark-based lending rates (EBLRs) by 190 basis points in tandem with the hike in the Reserve Bank's policy repo rate since May this year, though they have been slow in raising the deposit rates.
The Reserve Bank of India (RBI) has hiked the key short-term lending rate (repo) by 190 basis points in four tranches since May to contain inflation.
The RBI's Monetary Policy Committee (MPC), which makes recommendations to the central bank regarding interest rates, is set to meet again early next month amid expectations of another repo rate hike.
By October-end 2022, banks have increased their EBLRs by 190 bps in tandem with the increase in the policy repo rate since May 2022, according to an RBI article.
Further, banks have also increased their 1-year median marginal cost of funds-based lending rate (MCLR) by 85 bps from May to October 2022.
From October 1, 2019, all banks have to lend only at an interest rate linked to an external benchmark, such as RBI's repo rate or Treasury Bill yield. As a result, monetary policy transmission by banks has gained traction.
However, the banks have raised the interest rates on term deposits by a much lower margin.