The country's largest lender, State Bank of India (SBI), announced on Wednesday that it will raise the benchmark prime lending rate (BPLR) by 70 basis points to 13.45 percent effective Thursday (September 15).
However, the bank did not alter the marginal cost of the funds-based lending rate (MCLR), which would have reduced the cost for all borrowers.
Banks review the MCLR monthly, while the base rate is revised once a quarter. Currently, banks set loan interest rates based on the BPLR.
SBI raised its benchmark lending rates by up to 50 basis points earlier in August (or 0.5 percent). The External Benchmark Lending Rate (EBLR) and Repo-Linked Lending Rate (RLLR) have been raised by 50 basis points, while the Marginal Cost of Funds-based Lending Rate (MCLR) has been raised by 20 basis points across all tenure.
SBI's EBLR increased to 8.05 percent, while its RLLR increased by 50 basis points to 7.65 percent. Banks charge a Credit Risk Premium (CRP) in addition to the EBLR and RLLR when making any type of loan, including mortgages and auto loans.
With the revision, the one-year MCLR increased from 7.50 percent to 7.70 percent, while the two-year MCLR increased to 7.90 percent and the three-year MCLR increased to 8%. The majority of loans are linked to the one-year MCLR rate.
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