ICICI Bank, PNB hike external benchmark based lending rates

Post Reserve Bank of India (RBI) hike in repo rate on Thursday, two major banks -- ICICI Bank and PNB have raised their lending rates, on Friday.

ICICI Bank External Benchmark Lending Rate (I-EBLR) is referenced to RBI policy repo rate with a mark-up over repo rate, ICICI Bank said in a notification.

"I-EBLR is 9.10 per cent p.A.P.M. (per annum payable monthly) effective August 5, 2022," the private sector lender added.

State-owned Punjab National Bank (PNB) also raised the repo, the external benchmark, linked lending rate to 7.90 per cent.

"Consequent upon an increase in repo rate by RBI, the Repo Linked Lending Rate (RLLR) has been revised from 7.40 per cent to 7.90 per cent with effect from August 8, 2022," PNB said in a regulatory filing.

According to the RBI directions, the interest rate under the external benchmark is supposed to reset at least once in three months.

Subsequently, from October 1, 2019, all new floating rate personal and retail loans (housing, auto), and floating rate loans to Micro and Small Enterprises by banks were linked to an external benchmark (repo) rate.

Hence, Banks can take the external benchmark as the RBI's repo rate or the government's treasury bill-based yields published by the Financial Benchmarks India Private Ltd (FBIL) or any other benchmark market interest rate published by FBIL.

The lenders are free to decide the spread over the external benchmark as well as to offer such external benchmark-linked loans to other types of borrowers as well.

It must be noted that earlier this month, ahead of RBI policy rate announcement, the ICICI bank had revised the  marginal cost of funds-based lending rate (MCLR) by 0.15 per cent across all tenors.

On Thursday, the RBI increased the repo rate at which it lends short-term money to banks by a steep 50 basis points taking the repo rate to a three-year high of 5.40 per cent in its attempt to tame the inflation.  

Retail inflation has remained stubbornly high at over 6 per cent for more than the past six months in a row.

with inputs from PTI