MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum rate of interest banks are allowed to give out loans to its customers. It was introduced by the RBI in 2016 to ensure better pricing of floating rate loans to customers.
State Bank of India (SBI) India’s largest public sector lender has hiked its marginal cost of lending rate (MCLR), the bank said. The decision to hike MCLR will lead to an increase in EMIs for borrowers. The one-year MCLR is considered important from a retail loans perspective, as a bank’s long-term loans like home loans are linked to this rate.
Tenor-wise MCLR effective from August 15, 2022, as per the lender’s website:
Overnight: Old Rates — 7.15 per cent; New rate — 7.35 per cent
One Month: Old Rates — 7.15 per cent; New rate — 7.35 per cent
Three Month: Old Rates — 7.15 per cent; New rate — 7.35 per cent
Six Month: Old Rates — 7.45 per cent; New rate — 7.65 per cent
One Year: Old Rates — 7.50 per cent; New rate — 7.70 per cent
Two Year: Old Rates — 7.70 per cent; New rate — 7.90 per cent
Three Year: Old Rates — 7.80 per cent; New rate — 8.00 per cent
The Reserve Bank of India (RBI) to control inflation in early August raised the key repo rate by 50 basis points (bps), which was the second hike within two month after the central bank’s Monetary Policy Committee increased 40 basis points in off-cycle policy review in May and subsequetly by 50 basis points during the June MPC.The retail inflation in July cooled off to 6.71 per cent, which is higher than the RBI’s target limit of 2-6 per cent. However, the back to back hikes in interest rates by the central bank has helped bring down inflation from a record high in April, said in news.
With the increase in the MCLR, loan borrowers may not be happy as the interests are most likely to go up. This is applicable to both existing and future borrowers.