Borrowers dealing with state-run lenders are set to face higher borrowing costs as Bank of Baroda and Canara Bank have introduced an upward revision in their Marginal Cost of Funds Based Lending Rates (MCLR). Both public sector banks have raised their lending benchmark by 5 basis points, equivalent to 0.05 percent, across select tenors. These updated rates will take effect on Friday, June 12, directly driving up interest obligations and borrowing costs on all loans pegged to the respective banks' MCLR metrics.
Understanding the Role of the MCLR Benchmark
The adjustment comes just one week after the Reserve Bank of India (RBI) decided to maintain the benchmark repo rate at 5.25% during its monetary policy meeting held on June 5, 2026. The MCLR serves as the internal floor rate below which commercial banks and financial lending institutions are legally barred from granting credit to borrowers. Established to improve rate transmission and ensure transparency in lending operations, the RBI initially rolled out the MCLR framework back in 2016.
Tenor-Wise Rate Revisions at Bank of Baroda
Bank of Baroda has implemented an increase of 5 basis points, or 0.05 percent, across five specific maturity tenors. The bank's overnight MCLR has been marked up from 7.80% to 7.85%, while the benchmark for a one-month tenor moves from 7.90% to 7.95%. These short-term rates reflect the rising costs in immediate and month-long financial funding requirements.
For intermediate-term maturities, the three-month MCLR has climbed from 8.15% to 8.20%, and the six-month tenor rate has been adjusted from 8.45% to 8.50%. Crucially, the one-year MCLR, which is commonly utilized by public lenders as the core benchmark for standard retail credit lines including consumer finance and long-term advances, was pushed upward from 8.70% to 8.75%, representing a uniform 5-basis-point increase across the board.
Canara Bank Adjusts Rates for Short-Term Maturities
Canara Bank has simultaneously recalculated its rate structure, applying a 5-basis-point upward revision focused on shorter-duration loan tenors. The lender's overnight MCLR has risen from 7.90% to 7.95%. Following the same proportion, the one-month tenor has moved up from 7.95% to reach the 8.00% mark.
Further up the duration ladder, Canara Bank's three-month rate has been revised from 8.20% to 8.25%, and the six-month MCLR now stands at 8.60%, up from the earlier 8.55%. The bank has kept all other loan tenors outside these specific short-term brackets unchanged, leaving the rest of its broader lending schedule unaltered for the time being.
