Borrowers with floating-rate loans are likely to see higher EMIs, as Canara Bank has increased its Marginal Cost of Funds Based Lending Rate (MCLR) across all tenors by 5 basis points (bps).
This decision is effective for all Canara Bank MCLRs starting from 12 May, as detailed in a filing with BSE. Meanwhile, Bank of Baroda has kept its MCLR unchanged.
The revision is bound to impact home loans, auto loans and personal loans linked to the MCLR benchmark. This rate is generally reset periodically in line with a bank’s changing policies.
Let us discuss the concept of MCLR in greater depth to better understand how this change will affect common citizens.
What is the meaning of MCLR?
MCLR is the minimum interest rate at which banks can lend. The only exception in this case is when the intervenes and instructs a different rate of interest.
When the MCLR rises, the applicable loan interest rates are reset to a higher level, leading to on MCLR-linked loans. This makes tracking, understanding and following MCLR rates critical.
Revised Canara Bank MCLR Rates
|
Tenor |
Existing (%) |
Revised (%) |
|---|---|---|
| Overnight | 7.85 | 7.90 |
| 1 Month | 7.90 | 7.95 |
| 3 Month | 8.15 | 8.20 |
| 6 Month | 8.50 | 8.55 |
| 1 Year | 8.70 | 8.75 |
| 2 Year | 8.95 | 9.00 |
| 3 Year | 9.00 | 9.05 |
The one-year MCLR is crucial, as most retail loans, including home and auto loans, are linked to it. This decision, therefore, can directly influence an individual’s borrowing and decisions.
Bank of Baroda MCLR (Unchanged)
|
Tenor |
MCLR (%) |
|---|---|
| Overnight | 7.80 |
| 1 Month | 7.90 |
| 3 Month | 8.15 |
| 6 Month | 8.45 |
| 1 Year | 8.70 |
What does it mean for future borrowers?
This means that MCLR-linked loan holders will see higher EMIs when their reset date arrives. In accordance with , the revised rates will apply to new loan offers, any renewals and resets post 12 May 2026.
Borrowers are advised to check whether their loan is MCLR-linked or repo-linked, as the transmission of rate changes differs.
FAQs: Canara Bank MCLR Impact on Loan EMIs
1. How is MCLR different from the repo rate?
1. MCLR is decided and set by banks on funding costs. Whereas the RBI sets the repo rate and indirectly impacts lending rates.
2. Do fixed interest loans get affected by MCLR changes?
2. No, as the fixed interest loans, interest rates stay constant and are not reset by MCLR changes.
3. How frequently can banks revise MCLR rates?
3. Depending on changes and developments in funding costs and liquidity conditions, banks can also review MCLR on a monthly basis.
4. Why is the one-year MCLR important for borrowers?
4. This is because it is a key benchmark that decides pricing on all retail loans, such as personal loans, home loans, etc.
5. Can borrowers reduce EMI burden after an MCLR hike?
5. Borrowers must understand the impact, and post the same can consider balance transfer or refinancing options as per guidance from a certified financial advisor.
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