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EMIs to go up as Canara Bank hikes lending rates by 15 bps

Canara Bank increased the Repo Linked Lending Rate (RLLR) and the Marginal Cost of Funds Based Lending Rate (MCLR).

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Public sector lender Canara Bank has increased the Repo Linked Lending Rate (RLLR) and Marginal Cost of Funds Based Lending Rate (MCLR). On October 7, 2022, the new rates will take effect. In reaction to the adjustment, the bank raised the MCLR and RLLR across all tenors. The increase in lending rates corresponds with the RBI's 50 basis point increase in the repo rate to 5.9 per cent.

Canara bank (MCLR)

Canara Bank increased rates overnight to 1-month MCLR by 15 basis points, from 6.90 per cent to 7.05 per cent. The rate on a three-month MCLR has increased by 15 bps to 7.40 per cent, while the rate on a six-month MCLR has increased by 15 bps to 7.80 per cent. The bank increased its rate by 1 basis point, from 7.75 per cent to 7.90per cent, on a one-year MCLR.

The Minimal lending rate is the lowest lending rate or internal benchmark that a bank may not lend below and is called the marginal cost of funds-based lending rate. The RBI's 50-bps hike in the repo rate to 5.90 per cent will have an impact on the variable interest rate on the home loan because the repo rate and the marginal cost of funds-based lending rate are connected.

Canara Bank (RLLR)

From 8.30 per cent to 8.80 per cent, Canara Bank raised its Repo Linked Lending Rate (RLLR) rate by 50 basis points. The lending rate that is correlated to the repo rate set by the RBI is referred to as the "repo-linked lending rate," or RLLR. The current RLLR interest rate, however, is influenced by a number of factors, including the loan size and loan-to-value ratio. The interest rates on loans change since RLLR is tied to an external benchmark.

Since Canara Bank increased their Revision in Marginal Cost of Funds Based Lending Rate (MCLR) and Repo Linked Lending Rate, the EMIs would rise to start on the following reset date. In reaction to the Reserve Bank of India's (RBI) 50 basis point hike in the repo rate to 5.9 per cent, banks like ICICI Bank, Bank of India and Punjab National Bank (PNB), SBI, HDFC Bank, Kotak Mahindra Bank, Union Bank of India, and Indian Overseas Bank have already begun raising their lending rates. Since May, the repo rate has increased by 140 basis points in an effort to curb inflation.

Shaktikanta Das, governor of the RBI, stated that consumer price inflation is still higher than the central bank's tolerance level when the rate hikes were announced at the MPC meeting in September 2022. This implies that there may be further rate increases in the near future, as many experts also think, and as a result loans will become more expensive.

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