EMIs for borrowers to surge as State Bank of India hikes lending rates
The hike will be effective from April 15. One basis point is equivalent to a hundredth of a percentage point.
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FollowThe Reserve Bank of India (RBI) may not have hiked the repo rate in its latest monetary policy meeting, but the country’s largest lender State Bank of India (SBI) has raised its marginal cost of funds based lending rate (MCLR) by 10 basis points (bps) or 0.1 per cent across all tenures, a move that will lead to an increase in EMIs for borrowers.
The hike will be effective from April 15. One basis point is equivalent to a hundredth of a percentage point.
SBI’s decision to hike the MCLR will make all existing and fresh home, auto and personal loans costlier. MCLR is the base rate set for banks as per the new RBI guidelines. It replaced the earlier base rate system to determine rates of interest for loans. RBI implemented MCLR on April 1, 2016.
SBI’s decision to hike the MCLR marks the start of an upward cycle in borrowing costs in the last three years. Other lenders could soon announce a hike in the rates.
SBI’s EBLR rate is 6.65 per cent, while the repo-linked lending rate (RLLR) is 6.25 effective April 1.
Banks add Credit Risk Premium (CRP) over the EBLR and RLLR while giving any kind of loan including housing and auto loans.
An overnight, one-month and three-month MCLR rose by 10 bps to 6.75 per cent, whereas a six-month MCLR increased to 7.05 per cent. Most of the loans are linked to the one-year MCLR rate. At the same time, two-year MCLR increased by 0.1 per cent to 7.30 per cent, while three-year MCLR rose to 7.40 per cent, news agency PTI reported.
The revised MCLR rate is effective from April 15, as per the information posted on SBI website.
Last week, Bank of Baroda (BoB), which is the fourth largest nationalised bank, announced a 0.05 per cent rise in the marginal cost of funds-based lending interest rates on all loans, effective April 12, 2022.
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