New Delhi: The State Bank of India (SBI), the country’s largest public sector lender, has raised the marginal cost of lending rate (MCLR) by 10 basis points (bps) across all loan terms, according to reports.
A basis point is equal to one hundredth of a percentage point. The increase took effect on April 15, 2022.
According to SBI, this increase will be implemented at all levels and could lead to increased EMIs of home, auto and other loans for existing and future borrowers.
MCLR by content effective April 15:
Overnight: current rate — 6.65%; New rate — 6.75%
One month: current rate – 6.65%; New rate — 6.75%
Three months: current rate — 6.65%; New rate — 6.75%
Six months: current rate — 6.95%; New rate 7.05%
One year: current rate — 7.00%; New rate 7.10%
Two years: current rate — 7.20%; New rate 7.30%
Three years: current rate — 7.30%; New rate 7.40%
Except SBI, another public sector bank, Bank of Baroda (BoB) also announced a hike in the marginal cost of lending rate.
The BoB raised the marginal cost of fund-based lending rates by 5 basis points across all tenors. The one-year benchmark duration of the MLCR is now 7.35% as of April 12, 2022.
What is MCLR?
The MCLR or Marginal Cost of Funds based Lending Rate is a reference interest rate, which means that it is the minimum interest rate that banks can authorize to grant loans to their customers. This was introduced by the Reserve Bank of India (RBI) in 2016. The new RBI guideline replaced the base rate for commercial banks to set lending rates.
The marginal cost of funds is an important factor in determining the MCLR. Any change in key rates, such as the repo rate, which affects the marginal cost of funds, will have an effect on the MCLR. When their home loan reset date arrives, the increase in MCLR will show up in their EMIs. The RBI kept policy rates unchanged at its monetary policy meeting (MPC) on April 8. The SBI’s announcement of the MCLR hike comes days after the RBI kept the repo rate unchanged at 4% at its MPC meeting.