Bank Lending Rates Rise: BoB & Canara Bank Increase MCLR

Bank of Baroda and Canara Bank have announced an increase in their Marginal Cost of Funds-Based Lending Rates (MCLR) by up to 10 basis points, with changes effective August 12, 2026. This adjustment follows the Reserve Bank of India’s (RBI) decision to maintain its repo rate at 5.25%.

The MCLR serves as a benchmark reference rate established by the RBI, dictating the minimum interest rate banks are permitted to charge across various loan categories. A single basis point (bps) is equivalent to 0.01%, meaning a 10 bps increase translates to a 0.10% rise in interest.

This rate adjustment directly impacts borrowers whose loans are linked to the MCLR, potentially leading to higher Equated Monthly Installments (EMIs) or an extension of their loan repayment tenure. Borrowers with fixed-rate loans, however, will not be affected by these revised rates.

Bank of Baroda’s Revised Rates

Bank of Baroda specifically increased its three-month MCLR by 10 basis points, moving it from 8.20% to 8.30%. Other MCLR tenures, including overnight, one-month, six-month, and one-year, will remain unchanged.

These unchanged rates stand at 7.85% for overnight, 7.95% for one-month, 8.50% for six-month, and 8.75% for one-year MCLR respectively.

Canara Bank’s Rate Changes

Canara Bank implemented a 5 basis points increase across several of its MCLR tenures, while its overnight MCLR remains steady at 7.95%. The one-month MCLR rose from 8.00% to 8.05%, and the three-month MCLR moved from 8.25% to 8.30%.

Its six-month MCLR increased from 8.60% to 8.65%. Furthermore, the one-year, two-year, and three-year MCLRs also saw increases, reaching 8.80%, 9.05%, and 9.10% from their previous rates.

Why MCLR Changes Independently

It is crucial to understand that an MCLR increase is not always a direct consequence of a repo rate change by the Reserve Bank of India. A bank’s internal cost of raising funds can also drive these adjustments, influencing the benchmark lending rate.

This means that banks can adjust their MCLR based on their operational costs, even when the central bank’s policy rates, like the repo rate, remain unchanged.