India’s largest lender, the State Bank of India (SBI), has increased the marginal cost of lending rate (MCLR) by 0.1 per cent after Bank of Baroda increased it last week.
The new rate is effective from April 15, 2022.
The Revised Yearly Lending Rates
According to SBI’s website, the revised yearly marginal cost of lending rate (MCLR) is as follows:
One Year: 7.1 per cent.
Two Year: 7.3 per cent
Three Year: 7.4 per cent
The Revised Short Term Lending Rates
According to SBI’s website, the revised shorter-term marginal cost of lending rate (MCLR) is as follows:
Overnight: 6.75 per cent
One Month: 6.75 per cent
Three Months: 6.75 per cent
Six Months: 7.05 per cent
One basis point means one-hundredth part of a percentage point.
The Reserve Bank of India had kept the repo rate unchanged at 4 per cent during its bi-monthly monetary policy committee (MPC) meeting last week.
Earlier this week, in a stock exchange filing, India’s second-largest bank, Bank of Baroda (BoB), had raised the MCLR by 0.05 per cent across tenors. As a result, the benchmark one-year tenor MCLR is now 7.35 per cent, with effect from April 12, 2022, for BoB borrowers.
How Could This Increase In Rate Impact Your Life?
If you have a home loan, automobile loan, or other types of loans that are floating rate-based and benchmarked to MCLR, then the equated monthly instalments (EMIs) could increase in the coming months. Till now, two public sector banks have increased their lending rates (SBI and BoB).
Other banks are likely to follow suit, which could result in higher cost of borrowing for individual borrowers as well as institutions. A higher cost of borrowing would mean that people would be spending less, and hence, inflation could go down as a result of this.
What Is The Marginal Cost Of Lending Rate (MCLR)?
The Reserve Bank of India had in 2016 introduced MCLR in floating-rate loan systems so that end consumers could get better-priced loans. This rate is the minimum rate of interest at which any bank could lend to its clients who have their loans benchmarked to this rate.