The leading Public Sector Banks, Bank of Baroda and Canara Bank have increased their Marginal Cost of Funds Based Lending Rates (MCLR) by up to 10 basis points (bps) on select tenures, effective from August 12, 2026.
Recently, the HDFC Bank has cut its MCLR by 5 basis points across most loan tenures.
The move coming days after the Reserve Bank of India (RBI) has announced to take a pause on the repo rate, keeping it at 5.25 per cent.
Notably, a basis point is the one-hundredth of a percentage point. MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan.
Canara Bank has increased MCLR on select tenures by 5bps. After the increase, lending rates will range from 7.95% to 9.10% across tenures.
Further, the Bank of Baroda has increased MCLR on a select tenure by 10 bps. After the increase, lending rates will range from 7.85% to 8.75% across tenures.
The RBI Monetary Policy Committee (MPC) has recently unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, continuing with the neutral stance.
Will it increase your EMI?
A Loan interest rate is calculated by the maths of benchmark rate + spread. This is subject to the loan agreement.
It is not necessary that a 5 bps MCLR increase will necessarily translate into a 5 bps uptick in the final interest rate immediately.
Notably, the MCLR-linked loans do not necessarily reprice the moment a bank changes its MCLR. The applicable reset frequency is part of the loan contract, and the RBI rules require MCLR-linked floating-rate loans to have a reset period of one year or less.