The country's largest lender State Bank of India has raised its marginal cost of funds based lending rate by 10 basis points or 0.1 per cent across all tenures, a move that will lead to an increase in EMIs for borrowers. This is the second hike in a month raising the cost by 0.2 per cent with the two consecutive increases.
The revision follows an off-cycle rate increase by the Reserve Bank earlier this month. The central bank hiked the repo rate -- at which it lends short term money to banks -- by 0.40 per cent to 4.40 per cent. The lending rate revision by SBI (State Bank of India) is likely to be followed by other banks in the days to come.
With the increase, EMIs will go up for those borrowers who have availed loans on MCLR (Marginal Cost of Funds based Lending Rate), not for those, whose loans are linked to other benchmarks. SBI's External Benchmark based Lending Rate (EBLR) is 6.65 per cent, while the Repo-Linked Lending Rate (RLLR) is 6.25 per cent effective April 1.
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Banks add Credit Risk Premium (CRP) over the EBLR and RLLR while giving any kind of loan, including housing and auto loans. The revised MCLR rate is effective from May 15, as per the information posted on SBI website. With the revision, one-year MCLR has increased to 7.20 per cent from 7.10 per cent earlier. An overnight, one-month and three-month MCLR rose by 10 basis points to 6.85 per cent, whereas a six-month MCLR increased to 7.15 per cent. Most of the loans are linked to the one-year MCLR rate.
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At the same time, two-year MCLR increased by 0.1 per cent to 7.40 per cent, while three-year MCLR rose to 7.50 per cent. Following the rate revision by RBI, several banks have already raised interest rates and some more are expected to follow in the coming days.
