Soon after the Reserve Bank of India (RBI) hiked repo rate by 50 basis points, Canara Bank has carried out a similar increase in its lending rate. The state-owned bank has hiked its repo rate linked lending rate to 8.30% from 7.80% earlier, an increase of 50 basis points. 

The new lending rate will come into effect on 7 August.

Private lender ICICI Bank and state-owned Punjab National Bank (PNB) have also raised their lending rates, as reported earlier by Indianbankingnews.com. Other banks are expected to follow suit as India moves to a high interest rate regime amid rising inflation.

The effective interest rate on home loans for new borrowers will be 8.10% and for women 8.05%, according to the Canara Bank website. For high-risk borrowers, a credit risk premium in the range of 0.05% and 2% will be added to the repo rate linked lending rate to arrive at an effective interest rate on home loans.

The state-owned bank will offer a concession of 25 basis points to low-risk borrowers till 30 September. “The concession will be applicable to only low-risk borrowers where new housing loans (all variants) are sanctioned and disbursed during the period i.e., from 01.07.2022 to 30.09.2022,” Canara Bank said in its website. For women borrowers, a concession is available for 5 basis points.

The effective interest rate on home loans for high-risk borrowers will be between 8.35% and 10.30% from 7 August.