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RBI doesn't raise repo rate, yet loans remain expensive

By Lokmat English Desk | Updated: August 12, 2023 17:11 IST

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After the monetary policy committee meeting on Thursday, the Reserve Bank kept the repo rate at 6.50 percent. But several public sector banks hiked their interest rates on Friday. Bank of Baroda (BoB), Canara Bank, Bank of Maharashtra have cut the MCLR rate by 0.10 percent.
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Vishesh Gandhi, finance mentor, MMW Financial Services, says, “Banks are not informing customers about the impact of this interest rate hike on their EMIs and are not giving them an option to reset the loan with consumers whenever rates rise.
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At this time there is a supply chain problem and there is a lot of demand. In such a situation, banks are increasing the lending rates so that excess cash can be removed from the system and inflation will be brought under control, Gandhi also mentioned.
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The increase in MLCR of various banks will affect only those customers whose interest rates are based on MLCR. In fact, from October 1, 2019, banks have been given the freedom to link their lending rates to an external benchmark.
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Financial planner Karthik Zaveri says how many customers know which option is right for them? After the RBI's framework comes into force, banks that work to extend tenure for their own benefit without informing the customer will be curbed
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The impact of these changes on MLCR linked monthly installment and repo rate based loan customers is not communicated to the customers. The customer's monthly installment (EMI) is linked to the MLCR itself. Zaveri also said that consumers should stay on the side of floating.
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After the three-day meeting of the Credit Policy Committee, RBI Governor Shaktikanta Das said under this, banks will have to provide clear information about the loan tenure and monthly installments (EMI) to the borrowers. RBI soon based on discussions with various banks.
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According to RBI, there is a need to avoid long tenure of loans unless necessary. The matter of extending the loan repayment period may be different for different people. He also mentioned that banks need to monitor such cases.
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Banks need to determine the tenure of the loan keeping in mind the capacity of the individual. RBI will soon issue detailed guidelines in this regard. Under this, banks will have to provide clear information about the loan tenure and EMI to their customers.
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Bank of Baroda has increased the MLCR by 5 BPS. According to BoB's information to the stock market, the one-year MLCR has been revised to 8.70 percent. It is now 8.65 percent. The new rates will be effective from August 12. At the same time, Canara Bank has also increased the MLCR by 0.05 percent.
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According to the information provided by Bank of Maharashtra to the stock market, the one-year MLCR has increased from 8.50 percent to 8.60 percent. The revised rates are effective from August 10. This decision by the banks will increase the MLCR Linked EMI (EMI). Linked to relevant benchmark rates.
Tags: Bank news
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