By: ABP News Bureau | Updated at : 15 Jul 2023 04:33 PM (IST)
The hike in the marginal cost of funds-based lending rate (MCLR) by the State Bank of India (SBI) will result in an increase in EMIs for borrowers who have taken loans based on the MCLR. ( Image Source : Getty )
State Bank of India (SBI), the largest lender in India, has increased its marginal cost of funds-based lending rate (MCLR) by 5 basis points (bps) with effect from Saturday, July 15, 2023. The MCLR represents the minimum lending rate at which the bank can offer loans to borrowers. The updated lending rates now range from 8 per cent to 8.75 per cent, as per the information available on the SBI website.
The hike in the marginal cost of funds-based lending rate (MCLR) by the SBI will result in an increase in Equated Monthly Installments (EMIs) for borrowers who have taken loans based on the MCLR. However, borrowers whose loans are linked to other benchmarks will not be affected by this rate hike.
This revision follows the previous change made in March 2023, when SBI raised the benchmark prime lending rate (BPLR) by 70 basis points.
The majority of loans are tied to the one-year MCLR rate, which has increased by 5 basis points to 8.55 per cent. Additionally, the overnight, one-month, and three-month MCLR rates have risen to 8 per cent and 8.15 per cent respectively, while the six-month MCLR has increased to 8.45 per cent. The two-year MCLR has also gone up by 5 basis points to 8.65 per cent, and the three-year MCLR now stands at 8.75 per cent.
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The decision to follows the Reserve Bank of India’s (RBI) recent move to maintain the repo rate at 6.50 per cent. The repo rate represents the interest rate at which the central bank lends short-term funds to commercial banks. In its announcement, RBI Governor Shaktikanta Das indicated that the central bank is prepared to respond appropriately based on incoming data.
Since October 1, 2019, all banks, including SBI, are required to lend at interest rates linked to external benchmarks like the RBI’s repo rate or Treasury Bill yield. This change has facilitated the transmission of monetary policy by banks. The impact of the introduction of external benchmark-based loan pricing has been observed across various sectors, even those not directly linked to such pricing methods.
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