India’s largest public sector lender State Bank of India (SBI) has increased its marginal cost lending rate (MCLR), the bank said in a notification. The lender further said that the MCLR has been increased by 10 basis points (bps). Here, it should be noted that one basis point is equal to one hundredth of a percentage point. This means that with the SBI MCLR hike, the interest on the loan will increase by 0.10 per cent.
According to SBI, this hike will be implemented across all tenors. The hike has come into effect from April 15, and may result in an increase in EMIs for home, car and other loans for existing and future borrowers.
Here is the MCLR as per the SBI website, with effect from April 15, 2022:
Overnight: Current rate – 6.65 percent; New rate – 6.75 percent
one month: current rate – 6.65 percent; New rate – 6.75 percent
Three months: Current rate – 6.65 percent; New rate – 6.75 percent
Six months: Current rate – 6.95 percent; New rate 7.05 percent
One year: Current rate – 7.00 percent; New rate 7.10 percent
Two years: Current rate – 7.20 percent; New rate 7.30 percent
Three years: Current rate – 7.30 per cent; New rate 7.40 percent
It should also be noted that SBI is not the only bank to increase its MCLR recently. Another public sector lender, Bank of Baroda, has also announced a jump in its marginal cost of lending rate. Up to 5 bps in all periods. The benchmark one-year period MLCR has now been fixed at 7.35 per cent with effect from April 12, 2022. “The Bank has approved the review of Marginal Cost Based Lending Rate (MCLR) with effect from April 12, 2022”, BoB had said in a regulatory filing.
What is MCLR and how does it affect loan interest
MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum interest rate that banks are allowed to lend to their customers. It was introduced by RBI in 2016 to ensure better pricing of floating rate loans to customers.
With the increase in MCLR, SBI home and other borrowers may not be happy as the interest is most likely to rise. This applies to both existing and future borrowers. This is because the home loan interest is linked to the bank’s MCLR, and with a jump in that factor, the home loan interest may also go up. SBI’s MCLR hike announcement comes days after the Reserve Bank of India or RBI kept the repo rate unchanged at 4 per cent during its bi-monthly Monetary Policy Committee (MPC) meeting.
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