Bank of India has revised its Marginal Cost of Funds-based Lending Rate (MCLR) across select tenors, with the 1-year MCLR now set at 8.90% starting August 1, 2025. The move reflects the bank’s response to evolving market conditions, cost of funds, and monetary policy cues. This revision is expected to impact loan pricing for retail and corporate borrowers, especially those with floating-rate loans linked to the 1-year MCLR benchmark.
Key Highlights of the Rate Revision
- The revised 1-year MCLR stands at 8.90%, up from the previous 8.70%
- Overnight MCLR remains at 7.95%
- One-month MCLR is unchanged at 8.15%
- Three-month and six-month MCLRs are steady at 8.30% and 8.50%, respectively
- The three-year MCLR continues at 8.90%
Implications for Borrowers
- The 1-year MCLR is a key benchmark for pricing home loans, auto loans, and other retail credit products
- Borrowers with floating-rate loans linked to the 1-year MCLR may see an increase in EMIs
- Corporate borrowers with working capital facilities tied to MCLR will also be affected
- Fixed-rate loans remain unaffected by this revision
Market Context and Monetary Policy Influence
- The revision comes amid a stable repo rate environment, with the Reserve Bank of India maintaining the benchmark rate at 6.50%
- Rising deposit costs and liquidity management pressures have prompted banks to adjust lending rates
- Several other banks, including ICICI Bank and Bank of Baroda, have also revised their MCLR in recent weeks
- The move is part of a broader trend toward recalibrating lending rates in response to macroeconomic signals
Comparative Lending Landscape
- ICICI Bank’s 1-year MCLR currently stands at 8.90%
- HDFC Bank has revised its 1-year MCLR to 9.45%
- SBI’s 1-year MCLR is at 8.95% following a recent upward adjustment
- Bank of India’s revision brings its rate in line with peers, maintaining competitive positioning
Customer Advisory and Action Points
- Existing borrowers are advised to check their loan agreements to understand the impact of the revised MCLR
- New borrowers should compare MCLR-linked loan offers across banks before making credit decisions
- Customers may consider switching to fixed-rate loans or negotiating revised terms with their lenders
- Financial advisors recommend reviewing EMI schedules and budgeting for potential increases
Conclusion
Bank of India’s decision to revise its 1-year MCLR to 8.90% reflects a strategic recalibration in response to funding costs and market dynamics. While the change may lead to higher borrowing costs for some customers, it also signals the bank’s intent to maintain rate competitiveness and financial prudence. As the lending landscape continues to evolve, borrowers and investors alike will be watching closely for further rate movements and policy cues.
Source: Business Today
