MUMBAI: State Bank of India (SBI), the country’s largest lender, on Thursday increased marginal cost-based lending rates (MCLR) across all maturities, effective immediately. The revised rates are applicable for all fresh loans, though existing borrowers may not see an EMI increase immediately.
MCLR is a benchmark rate based on which banks determine interest rates on all retail loans including home, auto, education and personal loans. They come in various tenors including overnight to as long as three years and interest-rate spread varies accordingly.
For instance, SBI has seven tenors -- overnight, one month, 3, 6, 12, 24 and 36 months. Typically, retail loans — particularly home loans — are linked to one-year MCLR, which SBI has now increased by 20 basis points (bps) to 8.15 per cent from 7.95 per cent.
It means new borrowers will have to pay Rs 374 more every month towards EMIs at Rs 25,374 for a Rs 30 lakh loan (20-year tenure), against an EMI of Rs 25,000 calculated at the previous rate of 7.95 per cent.
Existing borrowers will not feel the pinch immediately, thanks to the reset clause. For instance, if your home loan is linked to 6-month MCLR, rates will be revised after six months from the last reset and the MCLR prevalent at that time will be applicable.
This is the first time SBI has raised the one-year MCLR since the new lending rate system came into existence in April 2016. SBI is not the only bank revising interest rates. The rate revisions also comes just a day after the bank raised interest rates on fixed deposits across most maturities.
PNB, too, raised lending rates, with one-year MCLR increasing by 15 bps to 8.30 per cent starting Thursday. In fact, lending rates rose an average 5-10 bps among private sector lenders like HDFC Bank, Axis Bank, Kotak Mahindra Bank and YES Bank since January, so expect higher EMIs in the future.