Starting on June 1, the state-owned Punjab National Bank increased the repo-linked lending rate (RLLR) for existing customers from 6.5% to 6.9%.
This has come into effect from May 7 for new customers. The bank has now increased its interest rates on term deposits by 60 basis points.
The increase in the RLLR is due to the sudden increase of RBI’s repo rate by 40 basis points. RBI had also increased the CRR (Cash Reserve Ratio) by 50 basis points.
ICICI Bank and Bank of Baroda, in addition to PNB, have linked their external benchmark to loan interest rates. So as the repo rate changes, the external benchmark lending rate rises or falls. All loans taken after October 2019 are linked to the repo rate. The hike in repo rate will affect the personal loans, vehicle loans and home loans.
With effect from October 1, 2019, RBI had instructed all banks to link the interest rate on all new floating rates personal or retail loans, as well as floating-rate loans to MSMEs, to an external benchmark.