Key Highlights
- Canara Bank raised its 2‑year and 3‑year MCLR by 10 basis points each.
- The new 2‑year MCLR is 8.95% (up from 8.85%).
- The new 3‑year MCLR is 9.00% (up from 8.90%).
- These revisions become operative on 12 March 2026 and affect all loans linked to the MCLR benchmark.
Detailed Insights
In a regulatory filing submitted to the Reserve Bank of India, Canara Bank disclosed that it will adjust the Marginal Cost of Funds Based Lending Rate (MCLR) for its medium‑term loan segment. The bank’s decision to add a ten‑basis‑point margin to both the two‑year and three‑year tenures reflects a modest uptick in its funding costs and operating expenses. Consequently, borrowers whose loan contracts reference the MCLR will see their interest obligations rise from 8.85% to 8.95% for a two‑year horizon and from 8.90% to 9.00% for a three‑year horizon, starting 12 March 2026.
The MCLR framework, introduced by the RBI in 2016, supplanted the earlier base‑rate system. Under MCLR, banks calculate the minimum lending rate by aggregating the marginal cost of funds, cash‑reserve‑ratio (CRR) requirements, and a predetermined spread for profitability. Any upward shift in the benchmark directly translates into higher loan‑rate quotations for customers.
Key Concepts
- MCLR (Marginal Cost of Funds Based Lending Rate): The baseline rate banks use to price variable‑interest loans, derived from their actual funding costs.
- Basis Point: One‑hundredth of a percentage point (0.01%). A 10‑basis‑point change equals a 0.10% movement in the rate.
- CRR (Cash Reserve Ratio): The proportion of a bank’s demand‑deposit liabilities that must be maintained as liquid cash with the RBI, influencing the cost of funds.