Loans to become costlier as bank hikes lending rates

Mumbai: The largest bank in the country, State Bank of India (SBI, has raised its marginal cost of funds-based lending rate (MCLR). The  marginal cost of funds-based lending rate is hiked by 10 basis points.

SBI’s overnight MCLR has increased from 8.10% to 8.20%. The monthly MCLR has risen from 8.35% to 8.45%, and the 3-month MCLR has also gone up by 10 basis points, from 8.40% to 8.50%. With this latest hike in the marginal cost of funds-based lending rates (MCLR), EMIs will increase for borrowers. A basis point (bp) is a 100th of a percentage.

MCLR, which was introduced by the Reserve Bank of India (RBI) in 2016, is a benchmark interest rate set by the RBI that banks use to determine their lending rates. Banks cannot give loans below this rate. When MCLR increases, it leads to higher interest rates on loans linked to this rate, causing borrowers to face higher EMIs and increased overall borrowing costs.

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Here is the detailed breakdown of the revised MCLR rates:

Overnight: Increased from 8.10% to 8.20%

One Month: Increased from 8.35% to 8.45%

Three Months: Increased from 8.40% to 8.50%

Six Months: Increased from 8.75% to 8.85%

One Year: Increased from 8.85% to 8.95%

Two Years: Increased from 8.95% to 9.05%

Three Years: Increased from 9.00% to 9.10%

In July, SBI had raised its MCLR by 5-10 basis points. Recently, state-owned PNB raised the MCLR by 0.05%, or 5 basis points, across tenors. The benchmark one-year tenor MCLR is at 8.90% against the earlier rate of 8.85%, PNB had said in a regulatory filing. The three-year MCLR stands at 9.20%.