With RBI moving to rise rate cycle, banks hike RLLR

• Several banks have raised their repo rate-linked lending rates (RLLR) after the Reserve Bank of India (RBI) increased the repo rate by 50 basis points (bps) to 5.40 per cent.

Key highlights

• Public sector lenders as well as private sector Banks have raised their RLLRs.
• RLLR is linked to or is based on the repo rate and is revised every time the RBI changes policy rates.
• With the RBI moving into a rising rate cycle, banks too have started raising their lending rates, both externally benchmarked and the marginal cost of funds-based (MCLR).
• As the transmission of monetary policy takes place more effectively under the EBLR regime, banks are opting to switch to the system.
• While banks revise RLLR whenever there is a change in repo rate, MCLR is revised by lenders every month.

Prelims take away

• Reserve Bank of India (RBI)
• Marginal cost of funds-based (MCLR).
• Repo rate-linked lending rates (RLLR)