Retail inflation has remained at an all-time high of over 6 per cent for the past six months.
ICICI Bank said in a notification that the ICICI Bank External Benchmark Lending Rate (I-EBLR) is referred to the RBI policy repo rate along with the mark-up on the repo rate.
“The i-EBLR is 9.10 per cent ppm (payable monthly per annum) with effect from August 5, 2022,” the private sector lender said.
state ownership
(PNB) also increased the repo, external benchmark, linked lending rate to 7.90 per cent.
“Consequent to the increase in the repo rate by the 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.
Earlier this month, ICICI Bank revised the marginal cost of funds-based lending rate (MCLR) to 0.15 per cent for all periods ahead of the RBI policy rate announcement.
A report by an internal study group of the RBI in 2017 said that internal benchmark rates such as the base rate or MCLR are not an effective transmission of the central bank’s monetary policy repo rate decisions. It then recommended a switchover to an external benchmark.
Subsequently, all new floating rate personal and retail loans (housing, auto), and floating rate loans by banks to micro and small enterprises were linked to an external benchmark (repo) with effect from October 1, 2019.
Banks may take the external benchmark as the repo rate of RBI or Treasury bill-based yield of government published by Financial Benchmarks India Private Limited (FBIL) or any other benchmark market interest rate published by FBIL.
Lenders are free to offer such external benchmark-linked loans to other types of borrowers as well as to fix the spread on the external benchmark.
As per RBI directions, the interest rate under external benchmark should be reset at least once in three months.