In response to the rising cost of funds, three major public sector banks- Bank of Baroda (BOB), Canara Bank and UCO Bank have increased their Marginal Cost of Funds Based Lending Rate (MCLR) by five basis points across select tenors.
Bank of Baroda announced in an exchange filing that it has revised its MCLR for the three-month tenor to 8.5 per cent from 8.45 per cent and for the six-month tenor to 8.75 per cent from 8.7 per cent. The one-year MCLR has also been adjusted to 8.95 per cent, up from the previous rate of 8.9 per cent. This increase comes as the bank’s cost of deposits rose to 5.06 per cent in the quarter ended June 2024 (Q1 FY25), compared to 4.68 per cent in the same quarter the previous year. Despite an increase in the yield on advances from 8.4 per cent to 8.55 per cent, the bank’s Net Interest Margin (NIM) saw a slight decline from 3.27 per cent to 3.18 per cent.
The recent MCLR hike highlights the ongoing challenges banks face in managing funding costs in a competitive environment.
Canara Bank has also implemented a hike in its MCLR across all tenors. The revised rate for the three-month tenor now stands at 8.45 per cent, up from 8.4 per cent, while the one-year MCLR has been increased to nine per cent from 8.95 per cent. The bank reported an increase in its cost of deposits to 5.7 per cent in Q1 FY25, up from 5.22 per cent in Q1 FY24. However, its NIM moderated from 3.05 per cent to 2.9 per cent, despite a rise in the yield on advances from 8.43 per cent to 8.66 per cent.
UCO Bank has similarly adjusted its lending rates. The bank’s MCLR for the one-month tenor has been raised to 8.35 per cent from 8.3 per cent, while the one-year MCLR is now 8.95 per cent, up from 8.9 per cent. Additionally, UCO Bank has reduced its Treasury Bill Benchmark Linked Rates (TBLR) for the one-month and 12-month tenors by 15 basis points and 10 basis points, respectively.
These adjustments reflect the ongoing challenges faced by banks in managing rising deposit costs while striving to maintain profitability in a competitive lending environment.
