New Delhi: State Bank of India (SBI) has decided to increase its Marginal Cost of Lending Rate (MCLR) by 10 basis points. The new lending rates will be implemented from 15th July. It will directly affect the EMI of the loan holders. MCLR for six-month loans has increased from 7.35 to 7.45 percent. According to the State Bank of India website, the MCLR for one-year loans has increased from 7.40 to 7.50 percent. MCLR has been increased from 7.35 percent to 7.45 percent for a period of six months. The MCLR has been increased from 7.60 percent to 7.70 percent over a period of two years. While for three-year loans, it has been increased from 7.7 percent to 7.8 percent. MCLR is the benchmark for bank loans, if the MCLR increases, the loan interest rate also increases. If the MCLR decreases, the loan interest rate also decreases. RBI hiked repo rate in May and June to curb inflation. After that now the bank has increased the MCLR.
What will be the impact of increase in MCLR on borrowers?
An increase in MCLR means that home, car or personal loans may increase which directly affects the monthly installments of borrowers. SBI home loan rates vary from 7.05% to 7.55% depending on the CIBIL score. SBI Auto Loan interest rate varies from 7.45% to 8.15%. SBI has been increasing its MCLR since April this year. In June, it hiked the MCLR by 20 basis points. Recently HDFC Bank and ICICI Bank have also increased their MCLR rates. HDFC has set MCLR for all term loans. While ICICI Bank has increased MCLR by 20 basis points for all tenures.
What is MCLR?
MCLR is the minimum lending rate at which small banks are not allowed to lend. Every month, banks revise their MCLR rates based on market conditions. MCLR is different for different tenures ranging from overnight to three years. It comes on the basis of factors like marginal cost of fund, operating cost, cash reserve ratio (CRR), and tenure premium. Bank of Baroda has increased the benchmark marginal cost of funds by 10-15 basis points based on the Fixed Tenure Lending Rate (MCLR). The new rates will be effective from July 12. IDFC First Bank, a private lender, has also raised benchmark lending rates by 10 to 15 basis points over various tenures. The new rates of Marginal Cost of Funds Based Lending Rate (MCLR) have come into effect from July 8, 2022.