SBI Hikes MCLR Across All Tenors By 10 Basis Points; Home Loan, Car Loan EMIs May Go Up

The hike has come into effect from 15 April 2022 and will be implemented across all tenors and may result in an increase in the EMIs of home, car, and other loans for existing and future borrowers

State Bank of India. Image: Getty

New Delhi: State Bank of India (SBI), the country’s largest public sector lender, has raised the marginal cost of lending rate (MCLR) by 10 basis points (bps) across all loan tenors, according to news reports.

One basis point is equivalent to one-hundredth part of a percentage point. The hike has come into effect from 15 April 2022.

According to SBI, this hike will be implemented across all tenors and may result in an increase in the EMIs of home, car, and other loans for existing and future borrowers.

Tenor-wise MCLR effective from April 15:

Over night: Existing rate — 6.65 per cent; New rate —  6.75 per cent

One Month: Existing rate — 6.65 per cent; New rate — 6.75 per cent

Three Month: Existing rate — 6.65 per cent; New rate — 6.75 per cent

Six Month: Existing rate — 6.95 per cent; New rate 7.05 per cent

One Year: Existing rate — 7.00 per cent; New rate 7.10 per cent

Two Years: Existing rate — 7.20 per cent; New rate 7.30 per cent

Three Years: Existing rate — 7.30 per cent; New rate 7.40 per cent

Barring SBI, another public sector bank, Bank of Baroda (BoB) has also announced a hike in the marginal cost of lending rate.

BoB raised the marginal cost of funds based lending rates by 5 bps across tenors. The benchmark one-year tenor MLCR is now 7.35 per cent with effect from April 12, 2022.

What is MCLR?
MCLR or Marginal Cost of Funds based Lending Rate is a benchmark interest rate, which means, it is the minimum rate of interest that banks can allow to give out loans to its customers. This was introduced by the Reserve Bank of India (RBI) in 2016. The new RBI guideline replaced base rate for commercial banks to set lending rates.

The marginal cost of funds is an important factor in determining the MCLR. Any changes in key rates, such as the repo rate, which affect the marginal cost of funds, will have an effect on the MCLR. When the reset date of their home loan arrives, the increase in MCLR will be felt in their EMIs (equated monthly instalment). The RBI kept the policy rates unchanged at its monetary policy meeting (MPC) on April 8. SBI’s MCLR hike announcement comes days after the RBI kept the repo rate unchanged at 4 per cent in its MPC meet.