Bank of Baroda: Ahead of the festive season, Bank of Baroda has given big relief to borrowers by cutting its MCLR rates. This move may reduce EMIs for people with home or personal loans.
The overnight and three-month MCLR rates have been lowered, but the one-year MCLR—key for home and auto loans—remains unchanged.
On Wednesday, the bank announced a 10 basis point cut in the overnight MCLR (Marginal Cost of Funds-based Lending Rate).
This rate is now 7.85% and the new rates will take effect from September 12.
Which rates were changed?
The bank has also lowered the three-month MCLR to 8.20%, down by 15 basis points. However, the one-month MCLR (7.95%) and six-month MCLR (8.65%) remain the same.
The one-year MCLR, which is an important benchmark for home and auto loans, also remains unchanged at 8.80%.
What is MCLR?
MCLR is the lowest rate at which banks can lend money, except in special cases allowed by the Reserve Bank of India (RBI).
It replaced the base rate system in April 2016 to help RBI rate changes pass on to customers more quickly and clearly.
MCLR is calculated based on many things like the bank’s cost of deposits, cost of funds, CRR (Cash Reserve Ratio) expenses, operating costs, loan term, risk premium, and other related charges.
How does it affect customers?
When a bank reduces MCLR, the EMIs of floating rate loans also go down, making loans cheaper for borrowers.
But if MCLR goes up, EMIs increase too. So, any change in MCLR directly affects how much customers pay each month in installments.
