Canara Bank and Bank of Baroda have increased their Marginal Cost of Funds-Based Lending Rates (MCLR) by up to 10 basis points on select tenures, effective from 12 August 2026. This decision came days after the Reserve Bank of India’s (RBI) announcement to maintain its repo rate at 5.25% during its Monetary Policy Committee (MPC) meeting.
The decision impacts borrowers with loans linked to the increased MCLR. While 1 bps equals 0.01%—which may look small—it exerts a significant influence on long-term loans.
What is MCLR?
MCLR is the minimum rate of interest a bank can charge on a specific loan. It is a benchmark reference rate introduced by the Reserve Bank of India (RBI) to determine the floor rate of interest for different categories of loans.
Bank of Baroda
Bank of Baroda has increased its MCLR by 10 bps on the three-month tenure, raising it from 8.20 percent to 8.30 percent. Meanwhile, the overnight, one-month, six-month, and one-year MCLRs remain unchanged at 7.85 percent, 7.95 percent, 8.50 percent, and 8.75 percent, respectively.
Canara Bank
Canara Bank has increased its MCLR on select tenures by 5 bps. The one-month MCLR increased from 8.00 percent to 8.05 percent, while the three-month MCLR jumped to 8.30 percent from 8.25 percent. The six-month MCLR moved up from 8.60 percent to 8.65 percent. The one-year, two-year, and three-year MCLRs also saw a jump to 8.80 percent, 9.05 percent, and 9.10 percent from 8.75 percent, 9.00 percent, and 9.05 percent, respectively. The overnight MCLR remains unchanged at 7.95 percent.
Does it directly imply an hike in interest for the people planning to borrow or are already repaying loan? The answer depends on whether your loan is liked to an MCLR, and its reset period. Borrowers with fixe-rate loans would not experience a rise in the EMIs.
An increase in the MCLR does not always reflect an increase in the repo rate; it can also result from a bank’s internal cost of raising funds. Consequently, borrowers may experience a hike in their EMIs or an extension of their loan tenure due to the increased rates on select tenures at these two banks.
