New Delhi: India’s largest public sector lender State Bank of India (SBI) has hiked its marginal cost of lending rate (MCLR), the bank has said in a notification. The increase of MCLR has been done by 20 basis points (bps), the lender further said. Here, it must be noted that one basis point equals one-hundredth part of a percentage point. This means that loan interests will increase by 0.20 percent with the SBI MCLR hike.
This hike will be implemented across all tenors, according to SBI. The hike has come into effect from August 15 and may result in an increase in the EMIs of homes, cars, and other loans for existing and future borrowers.
Here are the tenor-wise SBI’s MCLR effective from August 15, 2022, as per the lender’s website:
Overnight: Old Rates — 7.15 percent; New rate — 7.35 percent
One Month: Old Rates — 7.15 percent; New rate — 7.35 percent
Three Month: Old Rates — 7.15 percent; New rate — 7.35 percent
Six Month: Old Rates — 7.45 percent; New rate — 7.65 percent
One Year: Old Rates — 7.50 percent; New rate — 7.70 percent
Two Year: Old Rates — 7.70 percent; New rate — 7.90 percent
Three Year: Old Rates — 7.80 percent; New rate — 8.00 percent
SBI has been increasing its MCLR on loans since April 2022. Earlier, SBI raised the marginal cost of lending rate by up to 10 basis points with effect from July 15, 2022. Apart from MCLR, the lender also hiked its fixed deposit interest rates, effective from August 13, Saturday.
To control inflation, the Reserve Bank of India (RBI) in early August raised the key repo rate by 50 basis points (bps), which was the second hike within two months after the central bank’s Monetary Policy Committee increased 40 basis points in the off-cycle policy review in May and subsequently by 50 basis points during the June MPC. The retail inflation in July cooled off to 6.71 percent, which is higher than the RBI’s target limit of 2-6 percent. However, the back-to-back hikes in interest rates by the central bank have helped bring down inflation from a record high in April.
What is MCLR and How it Affects Loan Interests
MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum rate of interest banks are allowed to give out loans to their customers. It was introduced by the RBI in 2016 to ensure better pricing of floating rate loans to customers.
With the increase in the MCLR, SBI home and other loan borrowers may not be happy as the interests are most likely to go up. This is applicable to both existing and future borrowers. This is because home loan interest is associated with a bank’s MCLR, and with a jump in that factor, home loan interest might also go up.
