Winning Business Desk

Mumbai. India’s largest public sector lender State Bank of India (SBI) has hiked its marginal cost of lending rate (MCLR). The increase of MCLR has been done by 10 basis points (bps), the lender said. Notably, one basis point equals to one-hundredth part of a percentage point. This means that loan interests will increase by 0.10 per cent with the SBI MCLR hike. This hike will be implemented across all tenors, according to SBI. The hike has come into effect from April 15, and may result in an increase in the EMIs of home, car and other loans for existing and future borrowers.

Highlights:

• Over night: Existing rate — 6.65 per cent; New rate — 6.75 per cent
• One Month: Existing rate — 6.65 per cent; New rate — 6.75 per cent
• Three Month: Existing rate — 6.65 per cent; New rate — 6.75 per cent
• Six Month: Existing rate — 6.95 per cent; New rate 7.05 per cent
• One Year: Existing rate — 7.00 per cent; New rate 7.10 per cent
• Two Years: Existing rate — 7.20 per cent; New rate 7.30 per cent
• Three Years: Existing rate — 7.30 per cent; New rate 7.40 per cent

Here are the tenor-wise MCLR effective from April 15, 2022, as per SBI website:

It must also be noted that SBI is not the only bank to hike its MCLR recently. Another public sector lender, Bank of Baroda, has also announced a jump in its marginal cost of lending rate by 5 bps across tenors. The benchmark one-year tenor 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 of funds based lending rate (MCLR) with effect from April 12, 2022”, BoB had said in a regulatory filing.

What is MCLR and How it Affects Loan Interests

MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum rate of interest banks are allowed to give out loans to its customers. It was introduced by the RBI in 2016 to ensure better pricing of floating rate loans to customers.

With the increase in the MCLR, SBI home and other loan borrowers may not be happy as the interests are most likely to go up. This is applicable to both existing and future borrowers. This is because home loan interest is associated with a bank’s MCLR, and with a jump in that factor, home loan interest might also go up. The 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) meet.