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Canara Bank hikes lending rates by 10-40 bps

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MUMBAI : Public sector lender Canara Bank on Saturday said it has hiked its lending rates between 10-40 basis points (bps).

While the bank has passed on the entire 40 bps hike in the repo rate to customers whose loans are linked to the benchmark, the hike is marginal cost of funds based lending rate (MCLR) has been restricted to 10 bps, across tenors.

This comes a few days after the monetary policy committee (MPC), through its 40 basis point (bps) repo rate hike on 4 May, decided to reverse the cut effected during the pandemic in May 2020.

The central bank has been indicating that the days of easy money policy are all but over as the war-induced factors push inflation up.

On 8 April, the MPC indicated its intent to exit the “ultra-accommodative” stance it took during the pandemic and decided to prioritize inflation over growth as runaway commodity prices threaten to upend its price stability goal.

That said, experts believe that the central bank would continue to hike rates in the coming meetings in order to reach levels seen before the covid-19 pandemic set in.

“With the current hike of 40 bps in repo rate to 4.40% it seems the rate cycle has made a U-turn (from the steep cuts seen in early 2020) and the RBI would continue to increase the rates going forward and may reach the pre-pandemic level of 5.15% by end-March 2023,” Soumya Kanti Ghosh, group chief economic advisor, State Bank of India said in a note on 4 May.

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