SBI Raises Lending Rates On Loans Starting Today, EMIs Will Rise

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The State Bank of India or SBI, India’s largest lender, has increased the marginal cost of funds or MCLR based lending rate on loans effective today, a move that will make EMIs costly for those who have benefited from loans compared to the MCLR. The one-year MCLR is considered important from a retail lending perspective because a bank’s long-term loans, such as home loans, are tied to this rate.

The three-month SBI MCLR overnight rate was raised to 7.35% from 7.15%. SBI six-month MCLR increases from 7.45% to 7.65%, one year to 7.7%, from 7.5%, two years to 7.9% from 7.7% and three years at 8% from 7.8%.

Last month, SBI raised the marginal cost of fund-based lending rates by 10 basis points over different tenors.

The MCLR arrived in April 2016, in which banks were given a formula to calculate their cost of funding and then conduct monthly reviews of their offerings over varying terms. Each bank calculates its MCLR by considering factors such as its incremental cost of fundraising (eg, through deposits) and operating expenses, among others.

The MCLR was later replaced by the linked external benchmark rate so that lending rates moved directly in sync with policy changes. All existing variable rate bank loans are linked to the MCLR or the external lending reference rate (EBLR) or the base rate.

SBI Latest MCLR Rates

Overnight – 7.35%

One month – 7.35%

Three months – 7.35%

Six months – 7.65%

One year – 7.7%

Two years – 7.9%

Three years – 8%

The Reserve Bank this month raised the repo rate by 50 basis points, prompting many banks to raise various types of lending rates they charge borrowers.

The SBI last week raised interest rates on retail fixed deposits. Following the adjustment, the bank raised interest rates over a variety of terms and currently provides fixed deposits with maturities ranging from 7 days to 10 years with interest rates ranging from 2.90% to 5 .65% for the general public and from 3.40% to 6.45% for the elderly.

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