The interest rates on various retail loans, excluding home loans, have experienced an upward shift, as numerous banks recalibrate their marginal cost of lending rate (MCLR). While home loans remain linked to the unchanged repo rate since February 2023, a divergence is evident in other loan categories.
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According to The Times of India report, SBI, initially offering auto loans at 8.65% until December, has revised the starting rate to 8.85%, particularly for clients with high credit scores. Similar adjustments are observed across the banking sector, with Bank of Baroda raising auto loan rates from 8.7% to 8.8% and reintroducing processing fees, previously waived during festival months.
The report added that Union Bank of India has implemented rate hikes on auto loans and selected personal loans by adjusting the spread over the external benchmark. The public sector lender now offers car loans starting at 9.15%, compared to the earlier rate of 8.75%. IDFC First Bank and Karnataka Bank have also adjusted interest rates on personal loans, reflecting a broader industry trend.
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According to a bank executive as quoted by The Times Of India, the delay in rate revisions was attributed to the conclusion of the festival season. The increased cost of funds, influenced by shifts in deposit rates and market tightness, contributed to this adjustment.
Interestingly, on January 3, Bank of Maharashtra took a divergent approach by reducing its home loan interest rates from 8.5% to 8.35%.
