Mumbai: Several banks have raised their repo-linked lending rates after the Reserve Bank of India increased its policy rate by 25 basis points to 5.50 per cent, setting the stage for higher borrowing costs.
Punjab National Bank, Indian Bank and Bank of Baroda were among the lenders that announced increases soon after. Bank of India, Indian Overseas Bank and Tamilnad Mercantile Bank also revised their lending benchmarks.
The changes show how quickly the central bank’s policy decision is feeding into bank lending rates, with several revisions taking effect from October 8.
PNB and Indian Bank raise rates
Punjab National Bank raised its Repo Linked Lending Rate from 8.10 per cent to 8.35 per cent, effective October 8, according to a regulatory filing.
Both rates include the bank’s BSP component of 0.35 per cent. PNB said its Marginal Cost of Funds Based Lending Rate and Base Rate would remain unchanged.
Indian Bank increased its Repo Linked Benchmark Lending Rate from 7.95 per cent to 8.20 per cent. The lender said the revised rate would apply from October 8.
More lenders follow suit
Bank of Baroda raised its Repo Based Lending Rate by 25 basis points, from 7.90 per cent to 8.15 per cent.
Bank of India and Indian Overseas Bank increased their repo-based lending rates to 8.35 per cent, effective October 8. Bank of India said its revision followed the RBI’s increase in the policy rate.
Among private lenders, Tamilnad Mercantile Bank raised its Repo Linked Lending Rate from 8.25 per cent to 8.50 per cent.
RBI signals further tightening
The RBI’s six-member Monetary Policy Committee unanimously approved the rate increase, its first in nearly four years and the first since Governor Sanjay Malhotra took office in December 2024.
Alongside the increase, the committee shifted its policy stance to calibrated tightening, signalling that further increases could follow and ruling out a rate cut in the near term.
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The policy shift comes amid rising inflation and pressure on the rupee. While the rate increase had been anticipated, the change in stance marked a stronger signal on the RBI’s policy direction.
Other lenders are expected to announce revisions to their benchmark lending rates following the central bank’s decision.
