Banks hikes interest rates on car and personal loans

In a major development, interest rates on some retail loans, excluding home loans, have started inching up, with several banks revising their marginal cost of lending rate (MCLR). Although banks have linked their home loans to the repo rate (the rate at which the Reserve Bank of India lends), which has stayed the same since February 2023, many other loans are not linked to the repo rate.

According to a TOI report, SBI, which offered auto loans beginning at 8.65% until December has hiked the starting rate to 8.85% to clients with high credit scores. Several other banks have increased their personal loan rates as well. Bank of Baroda, which was charging 8.7% on auto loans last month, is charging 8.8% and has reintroduced its processing fees, which were waived during the festival months. Union Bank of India too has hiked rates on auto loans and some of its personal loans by revising the spread over the external benchmark. The public sector lender now has car loans starting at 9.15% as against 8.75% earlier.IDFC First Bank has increased interest rates on personal loan from 10.49% in November to 10.75% while Karnataka Bank has hiked personal loan rates from 14.21% to 14.28% during the same time period. Other banks followed suit after SBI hiked its deposit rates by 50 basis points from December 27. This will lead to an increase in their marginal cost of lending rate, which is a benchmark for commercial loans, and therefore push up interest rates on this segment as well.