Bank of Baroda has upped its marginal cost of funding-based lending rate (MCLR) by 5 basis points on four of five tenors.

The revised rates will be effective from April 12. The revised MCLRs are: overnight (8.10 per cent vs 8.05 per cent now); three months (8.45 per cent vs 8.40 per cent); six months (8.65 per cent vs 8.60 per cent); and one year (8.85 per cent vs 8.80 per cent).

One month MCLR, however, remains unchanged at 8.30 per cent. With the objective of improving the magnitude and pace of monetary transmission to actual lending rates of banks and imparting transparency to the lending rates setting process, the RBI has been periodically refining the process of setting interest rates by banks.

As part of the aforementioned refinement process, the MCLR system, which is an internal benchmark lending rate, was introduced in 2016.

The degree of pass-through across bank groups improved further after the introduction of the EBLR (external benchmark-based lending rate) regime in October 2019.

In response to the cumulative increase of 250 basis points (bps) in policy repo rate since May 2022, the 1-year MCLR of banks increased by 169 basis points (bps) during May 2022and February 2024, per RBI data.

Consequently, the weighted average lending rate (WALR) on fresh rupee loans increased by 194 bps and that on outstanding rupee loans rose by 113 bps during May 2022 and January 2024.