SBI: Just a day after The Reserve Bank of India hiked the repo rates by 40 basis points, the State Bank of India’s Chairman Dinesh Kumar Khara asserted that RBI’s move will also boost the marginal cost of funds based lending rate (MCLR). MCLR is the minimum interest rate of the bank below which it cannot lend.
In an interview on May 5, SBI Chairman said to CNBC-TV18, “74 per cent of our total book is linked to external benchmarks. The actual movement on the interest rate of loans will be a function of the liquidity available in the banking system.”
SBI Hikes MCLR By 10 Basis Points
India’s largest public sector bank SBI has bumped up its Marginal Cost of Funds based Lending Rate (MCLR) by 10 bps, which means 0.1 per cent is going to be added to the lending rates for the borrowers for all tenures and of course EMI’s will go up.
We expect that soon other banks are also going to follow in the footsteps of SBI in the coming days. Note that the EMIs will rise for the borrowers who have availed of loans based on MCLR and not for the borrowers of other loan plans. The external Benchmark based Lending Rate(EBLR) of SBI is 6.65 per cent, on the other hand, Repo-Linked Lending Rate (RLLR) is 6.25 effective from April 1.
When you avail of housing or auto loans then the banks add Credit Risk Premium (CRR) on EBLR and RLLR.
MCLR After Increase
The modified MCLR is in effect from April 15, according to the SBI website. With this revision in rates for one year, the MCLR is 7.10 per cent as compared to the previous 7 per cent.
For one and three months the MCLR has risen by 10 bps to 6.75 per cent, on the other hand for six months MCLR has hiked to 7.05 per cent. Meanwhile, for two years, MCLR is now 7.30 per cent with an increase of 0.1 per cent and for three years, MCLR is moving up to 7.40 per cent.
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A recent piece of information released by RBI in the form of an article said, “Looking ahead, the proportion of loans linked to external benchmarks is expected to increase further along with a commensurate fall in the internal benchmark linked loans. Coupled with shorter reset periods, monetary transmission to banks’ interest rates can, thus, be expected to strengthen further.”