ICICI Bank raises its benchmark-based external lending rates; NDEs are ready to increase
ICICI Bank raised its lending rates after the RBI raised the benchmark interest rate by 0.50% on Friday.
The Reserve Bank of India (RBI) has raised the key repo policy rate – at which it lends short-term money to banks – by 50 basis points or 0.5% to a three-year high years of 5.40%.
ICICI Bank External Benchmark Lending Rate (I-EBLR) is referenced to the RBI policy repo rate with a markup over the repo rate, ICICI Bank said in a notice. “I-EBLR is 9.10% papm (per annum payable monthly) effective August 5, 2022,” he added.
Earlier this month, ICICI Bank also revised the marginal cost of funds-based lending rate (MCLR) by 0.15% across all tenors.
With the rise in I-EBLR, your home loan EMIs are also likely to rise.
After the RBI rate hike, the average home loan rate in the country could hit 8.5%, up from 8% currently.
What is the external benchmark lending rate?
From October 1, 2019, the RBI directed banks to establish a uniform external benchmark within a lending category.
External benchmark lending rates (EBLR) are lending rates set by banks based on external benchmarks such as the repo rate, 91-day treasury bills and 182-day treasury bills.
Each bank can choose such an external reference and link its lending rates. This would ensure a transparent and efficient way of setting lending rates based on the macroeconomic scenario.
Here are four external benchmarking mechanisms:
The repo rate announced by the Reserve Bank of India.
The yield of a 91 day treasury bill
The return on 182-day Treasury bills
All financial benchmarks India Pvt. ltd. has developed market interest rate benchmarks.