New Delhi: Public sector Bank of Baroda and private sector ICICI Bank have increased the interest rate (external benchmark lending rate) linked to the repo rate by 0.4 per cent after the Reserve Bank of India (RBI) hiked the repo rate.
After this increase, all types of loans including home, auto and personal loans from these two banks have now become expensive. The increased interest rate of ICICI Bank came into effect from May 4. While the Bank of Baroda rate comes into effect from May 5.
According to ICICI Bank, the bank’s external benchmark lending rate has been increased according to the RBI’s policy interest rate repo rate. According to the ICICI Bank website, this has been increased by 0.4 per cent to 8.1 per cent, which is effective with immediate effect. Similarly, the public sector Bank of Baroda has also increased the repo linked lending rate for retail loans by 0.4 per cent to 6.90 per cent.
It is noteworthy that with effect from October 1, 2019, the RBI had made it mandatory to link all personal and retail loans with floating rate to an external benchmark. The External Benchmark Lending Rate is the minimum rate of interest on a loan. The external benchmark also includes the RBI repo rate. In fact, it is the lowest rate of interest on a loan. However, the bank is free to fix any external benchmark.