State Bank of India, India's largest public sector bank, has raised its marginal cost of funds-based lending rate (MCLR) by 10 basis points across all tenures, effective Sunday, May 15. The public lender has raised its MCLR for the second time in two months.
SBI's overnight, one-month, and three-month MCLR has increased by 10 basis points to 6.85 percent, up from 6.75 percent previously. The six-month MCLR is 7.15 percent, the one-year MCLR is 7.20 percent, the two-year MCLR is 7.40 percent, and the three-year MCLR is 7.50 percent.
The MCLR was raised by the public lender 10 days after the Reserve Bank of India's monetary policy committee (MPC) raised the repo rate by 40 basis points to 4.40 percent. To combat increasing inflation, the committee decided to raise the rate in an off-cycle meeting.
SBI last raised its MCLR by 10 basis points in April, the first time it had done so since 2019. Since April, the lender has effectively raised its MCLR by 20 basis points.
What exactly is MCLR?
The marginal cost of funds-based lending rates, or MCLR, is the lowest interest rate that a financial institution, such as a bank or a lender, can provide on a loan. It is also frequently regarded as a bank or lender's internal reference rate or benchmark.
The RBI established the MCLR to assist borrowers with issues relating to the Base Rate regime (the previous benchmark). On April 1, 2016, it went into effect. The RBI updates this rate every now and then when the country's economic activity alter dramatically.
What impact will this have on you?
If you borrowed money from a bank to buy a house or a car, or if you took out a personal loan, your equivalent monthly instalments (EMIs) will rise in the coming months as a result of the MCLR hike.
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