UCO Bank has lifted its repo-linked lending rates by 25 basis points effective October 8, 2026, following the Reserve Bank of India’s recent policy shift. The move directly increases interest costs for many floating-rate borrowers, while older loan benchmarks remain unchanged.
UCO Bank has revised its benchmark lending rates upward, effective October 8, 2026, in response to the Reserve Bank of India’s recent decision to increase the policy repo rate by 25 basis points. This move is part of the standard transmission process, where banks adjust the interest they charge borrowers to align with the central bank’s evolving interest rate environment.
The bank’s Asset Liability Management Committee confirmed that the Repo-Linked Lending Rate (RLLR) for the 'UCO Float' variant has increased to 8.30% from 8.05%. Similarly, the 'UCO Prime' variant has been raised from 5.25% to 5.50%. These adjustments mean that many existing and new borrowers with floating-rate loans linked to these benchmarks will see their interest costs rise.
In addition to repo-linked products, the bank has updated its treasury bill-linked lending rates (TBLR) and government securities-linked rates. The three-month TBLR is now set at 5.30%, while six-month and 12-month rates have moved to 5.70% and 5.95%, respectively. The 10-year government security yield-to-maturity, which influences long-term lending costs, was adjusted to 7.32%.
While these external benchmarks have risen, the bank has kept its internal benchmarks, such as the Marginal Cost of Funds-Based Lending Rate (MCLR), unchanged. The one-year MCLR remains at 8.80%, while the base rate and the Benchmark Prime Lending Rate (BPLR) are steady at 9.60% and 14.25%, respectively. This provides a measure of continuity for borrowers with older loan products not directly pegged to the external benchmark.
From an investor perspective, these rate hikes reflect the broader banking sector's response to the RBI’s 'calibrated tightening' stance to combat inflation. While higher lending rates can support interest income, they also introduce risks. A persistent rise in borrowing costs can dampen credit demand from individuals and businesses, potentially slowing down loan growth. Additionally, banks must carefully manage the cost of their own deposits to protect their net interest margins (NIMs) in a rising rate environment. Investors may monitor the bank's upcoming quarterly results to assess whether this rate increase affects credit growth volumes or if the bank can maintain its profit margins while passing on these costs.