State Bank of India (SBI) has increased the marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) for all tenors. The MCLR hike by SBI comes days after the Reserve Bank of India (RBI) left the key policy rate unchanged.
This move is likely to be followed by other lenders, resulting in loans becoming costlier for borrowers.
The country’s largest lender has revised the one-year MCLR from 8.65 percent to 8.75 percent. Overnight MCLR has been increased from 8 percent to 8.1 percent. One and three month MCLR has been increased to 8.3 percent from earlier 8.2 percent.
The revised MCLR for two-year and three-year MCLR is 8.85 percent and 8.95 percent respectively. The new rates have become effective from today.
Last week, the RBI’s Monetary Policy Committee (MPC) left the repo rate – the key policy rate – unchanged at 6.5 percent due to concerns over a rise in food inflation. Introduced on April 1, 2016, MCLR is the lowest amount interest rate below which banks cannot lend. It reflects the trend in the borrowing costs of banks.
In 2019, the RBI introduced the External Benchmark Linked Rate (EBLR) – which is linked to the repo rate – to further increase the speed of monetary policy transmission. At present, all retail loans are linked to EBLR.
