The State Bank of India (SBI) has revised the marginal cost of funds-based lending rate (MCLR) on one-year tenure by 10 basis points for home loans with effect from January 15, 2023. MCLR is the minimum interest rate set by the bank below which it cannot lend.
As per the SBI notification, MCLR on one-year tenure is hiked to 8.4 per cent with effect from January 15, from the previous 8.30 per cent, even as the MCLRs on other tenures have been kept unchanged. Here are the existing and revised tenor-wise MCLR-based interest rates, effective from January 15:
Tenor Existing MCLR (In %) Revised MCLR (In %)
Overnight 7.85 7.85
One Month 8.00 8.00
Three Month 8.00 8.00
Six Month 8.30 8.30
One Year 8.30 8.40
Two Years 8.50 8.50
Three Years 8.60 8.60
The revision comes following the previous hike in November last year. SBI had raised the MCLR rate by 15 basis points across tenors, making most consumer loans costlier for borrowers. The rates came into effect on November 15, 2022. The benchmark one-year MCLR, used as a base for fixing the home, auto, and personal loans, was raised by 10 basis points (bps) to 8.05 per cent, as against 7.95 per cent earlier. Likewise, the two-year and three-year MCLRs were raised by 10 basis points each to 8.25 per cent and 8.35 per cent, respectively, as per the SBI notification on its website. Among others, one-month and three-month MCLRs were increased by 15 basis points each to 7.75 per cent. The six-month MCLR was up by 15 basis points at 8.05 per cent, while the overnight rate was higher by 10 basis points at 7.60 per cent.
Loans Linked To MCLR
All floating-rate loans, such as home loans and loans against property, etc., are typically linked to MCLR. Loans linked to MCLR have a reset clause in the loan document and a spread—some banks have an annual reset clause, and others may have a half-yearly reset clause.
The Reserve Bank of India (RBI) introduced the MCLR methodology to fix interest rates for advances on April 1, 2016. It replaced the base rate system introduced in July 2010. Banks must review and publish their MCLRs of different maturities every month. For example, home loans are mostly benchmarked against one-year MCLR.
