Before the festive season, Bank of Baroda has given relief to loan customers by reducing some of its MCLR (Marginal Cost of Funds Based Lending Rate) rates.
This change will make home and personal loans slightly cheaper as EMIs may go down. The new rates will be effective from September 12.
The bank announced on Wednesday that the overnight MCLR has been cut by 10 basis points to 7.85%.
However, the one-year MCLR, which is most important for home and auto loans, remains unchanged.
Which Rates Have Changed?
Overnight MCLR: Reduced by 10 basis points to 7.85%.
Three-month MCLR: Reduced by 15 basis points to 8.20%.
One-month MCLR: Unchanged at 7.95%.
Six-month MCLR: Unchanged at 8.65%.
One-year MCLR: No change, remains at 8.80%.
Since most home and auto loans are linked to the one-year MCLR, their EMIs will not be affected by this change.
What is MCLR?
MCLR is the minimum interest rate below which banks generally cannot lend, except in special cases allowed by the Reserve Bank of India (RBI).
It replaced the earlier base rate system in April 2016 so that changes in RBI’s policy rates reach customers more quickly.
The MCLR is calculated based on factors such as:
Cost of deposits and funds
Cash Reserve Ratio (CRR) expenses
Operating costs
Loan tenure and risk premium
How Does it Impact Customers?
A reduction in MCLR leads to lower EMIs on floating-rate loans, making borrowing cheaper. On the other hand, an increase in MCLR raises EMIs, making loans costlier.
In short, changes in MCLR directly impact customers’ monthly loan repayments.
