The adjustments come even as the Reserve Bank of India has kept the repo rate unchanged at 5.25 per cent
Public sector lenders have begun raising their marginal cost of funds-based lending rates (MCLR), signalling a tightening in funding conditions.Canara Bank and Bank of Baroda on Wednesday announced a 5 basis point (bps) increase in MCLR across select tenures, with the revised rates effective Friday.Canara Bank raised MCLR for overnight to six-month tenures by 5 bps, while leaving longer-tenure rates unchanged. Its revised MCLR now ranges from 7.95 per cent to 9.05 per cent. Bank of Baroda, in contrast, increased MCLR by 5 bps across all tenures, taking its range to 7.85 per cent to 8.75 per cent.HDFC Bank effective June 8, also hiked MCLR by up to 10 bps across select tenors, taking its overall rates range from 8.05 per cent to 8.65 per cent, reflecting similar pressures on funding costs across the banking system. The adjustments come even as the Reserve Bank of India has kept the repo rate unchanged at 5.25 per cent after cumulative cuts last year, indicating that liquidity conditions rather than policy rates are driving lending benchmarks.Economists say the rise in MCLR reflects tighter systemic liquidity. “The current tightness in the system are seeing banks adjust their MCLR rates. This should ease by July-August once the FCNR (B) money start coming in,” said Gaura Sengupta, chief economist at IDFC First Bank.A rise in MCLR typically leads to higher borrowing costs for loans linked to this benchmark, particularly corporate and retail loans. The recent moves suggest banks are passing on higher marginal funding costs to borrowers, even as they await an improvement in liquidity conditions in the coming months.Published on June 10, 2026
