The State Bank of India (SBI), India's largest lender, has raised its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps), equivalent to 0.1 per cent, across all loan tenures. This adjustment is expected to result in higher equated monthly instalments (EMIs) for borrowers who have opted for loans tied to the MCLR framework, while those with loans linked to alternative benchmarks will not be affected by the change.


According to the SBI website, the revised MCLR rates, effective from June 15, have seen adjustments across various tenures. The one-year MCLR has been raised to 8.75 per cent from its previous 8.65 per cent. Similarly, the overnight MCLR has increased to 8.10 per cent from 8.00 per cent, while the one-month and three-month MCLR rates have increased to 8.30 per cent from 8.20 per cent. The six-month MCLR now stands at 8.65 per cent, up from 8.55 per cent. 


Most loans are tied to the one-year MCLR rate. Additionally, the two-year MCLR has seen a 0.1 per cent hike to 8.85 per cent from 8.75 per cent, and the three-year MCLR has been adjusted to 8.95 per cent from 8.85 per cent.


When disbursing loans, including mortgages and auto loans, banks incorporate a credit risk premium on top of the External Benchmark Lending Rate (EBLR) and Repo Rate Linked Lending Rate (RLLR).


Since October 1, 2019, all banks, including SBI, are mandated to offer loans at interest rates tied to external benchmarks like the RBI's repo rate or Treasury Bill yield. This policy has significantly enhanced the effectiveness of monetary policy transmission through banks.


Meanwhile, SBI has also announced that it has raised $100 million through bonds to bolster its business expansion efforts. This development coincides with the RBI's Monetary Policy Committee (MPC) decision to maintain the repo rate, the key policy rate, at 6.5 per cent due to concerns regarding an increase in food inflation.


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