Mumbai: On Wednesday, Bank of Baroda announced a cut of 10 basis points in its overnight MCLR (Marginal Cost of Funds-Based Lending Rate). This new rate will now be 7.85 percent, and it will come into effect from September 12.
The bank also cut its 3-month MCLR by 15 basis points, bringing it down to 8.20 percent. This was mentioned in a statement filed with the stock exchange.
No Change in Other Loan Durations
However, the bank has not made any changes to its 1-month and 6-month MCLR, which will stay at 7.95 percent and 8.65 percent respectively. Also, the 1-year MCLR, which is the main benchmark for home loans and auto loans, remains unchanged at 8.80 percent.
What Is MCLR and Why It Matters?
The MCLR system was introduced in April 2016 to replace the older base rate system. It was designed to make loan interest rate changes faster and more transparent whenever the RBI changes policy rates.
MCLR helps banks decide the interest rates on different kinds of loans like home loans, personal loans, and business loans.
How It Affects You?
If your loan is linked to the overnight or 3-month MCLR, you may see a reduction in your EMI starting September 12.
But if your loan is tied to the 1-year MCLR (which is common for home and auto loans), your EMI will not change for now.
Lower MCLR means borrowing money becomes cheaper, while a rise in MCLR increases your interest cost.
