State Bank of India (SBI) has hiked its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) to match the recent repo rate increase by the Reserve Bank of India (RBI).
On February 8, RBI increased its repo rate by 0.25 per cent, following a series of hikes over the past year to curb the country’s spiraling high inflation. While the central bank’s monetary tightening has yielded modest results, it may still require efforts to reach its comfort level.
The hike in SBI’s MCLR will make most of its consumer loans, like auto and home loans, costlier, consequently increasing the equated monthly installments (EMI) of borrowers.
Banks follow an internal benchmarking system to set their minimum lending rate in the form of MCLR, primarily based on their borrowing cost of funds for lending.
SBI said the new rates would come into force today, February 15, 2023.
Its overnight MCLR has increased from 7.85 per cent to 7.95 per cent. One-month and three-month MCLR rates stand at 8.10 per cent, and the six-month MCLR rate was revised from 8.30 per cent to 8.40 per cent. For one-year, two-year, and three-year maturity, the rates were revised to 8.50 per cent, 8.60 per cent, and 8.70 per cent, respectively.
The MCLR-based loans have a reset period, after which rates get revised for the borrower. RBI introduced the MCLR framework in 2016 to determine interest rates for different loans.
Prior to the hike, SBI offered customers interest rate concessions, up to 30 to 40 bps, on home loans as part of its “campaign rates” offer. The floating rate after the concession was 8.60 per cent. Now, after the MCLR hike, it has gone up to 8.85 per cent.
The concession was applied to loans sanctioned until March 31, 2023, and to individuals with a credit score of 700 and 800.
Several banks, such as Bank of Baroda, Bank of India, and Punjab National Bank, raised their lending rates after the central bank’s repo rate increase on February 8, 2023.
