PNB, Indian Bank up MCLRs; BoI increases term deposit rates

What happened

Punjab National Bank and Indian Bank raised marginal cost of funds-based lending rates, which are benchmark rates used to price some loans, by 10 basis points across all tenors. Bank of India raised selected retail deposit rates by 10–20 basis points and introduced a 500-day deposit.

Confirmed

Global impact / market context

Higher lending rates can increase borrowing costs for customers whose loans reset with these benchmarks, potentially slowing loan demand or raising repayment burdens. Bank of India’s higher deposit rates may help attract savers, but they also increase the bank’s funding costs, affecting the difference between lending income and deposit expenses.

Analyst inference

Higher lending benchmarks can raise borrowing costs for customers and may eventually weigh on loan demand; higher deposit rates can increase banks’ funding costs as they compete for savers. If loan pricing adjusts more slowly than deposit pricing, banks’ profit per sale could be squeezed, though the article gives no impact data.

Analyst inference

What to watch

1. Check whether PNB and Indian Bank’s higher benchmark rates feed into loan rates for customers, and whether this slows new borrowing or increases repayments after the stated effective dates. Analyst inference
2. Watch for further Bank of India deposit-rate changes, especially across maturity periods, to see whether it continues offering higher returns to attract deposits. Analyst inference
3. Compare subsequent lending-rate and deposit-rate changes across these banks; the gap between what they earn on loans and pay depositors can shape future income. Analyst inference

Evidence

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