The State Bank of India (SBI) increased its marginal cost of funds-based lending rate (MCLR) by five basis points (bps) or 0.05 per cent across loan tenures from July 15, 2023.
MCLR is the minimum rate a bank or a lender offers its customers. During the Covid-19 pandemic in June 2020, the bank reduced the MCLR rate and kept it the same until March 2022.
The MCLR was 7.0 per cent for one-year tenures between June 10, 2020, and April 14, 2022. But it has risen several times since, including the latest hike, to 8.55 per cent, for one-year tenures.
Let’s see the rate changes for other tenures.
The overnight rate increased from 7.95 per cent to 8.0 per cent, and the one-month and three-month rates increased from 8.10 to 8.15 per cent.
The new MCLR for six months is 8.45 per cent, up from 8.40 per cent, and the one-year MCLR increased to 8.55 per cent from 8.50 per cent.
For two-year tenures, the new rate is 8.65 per cent, up from 8.60 per cent, and for three-year terms, the MCLR rose to 8.75 per cent from 8.70 per cent.
The new MCLR rates, effective from July 15, changed across tenures.
MCLR is the bare minimum rate at which the bank offers loans to borrowers. Although internally set, changes in the repo rate may also affect the MCLR rate. In February 2023, the Reserve Bank of India's (RBI) monetary policy committee raised the repo rate by 25 basis points to 6.50 per cent. After that, the RBI paused the repo rate hikes.
Who Would Be Affected?
With the increase in MCLR, the equated monthly instalments (EMI) of existing SBI borrowers will increase for loans linked with the MCLR rate.
However, only those loans linked to MCLR would be impacted, not those linked to the external benchmark lending rate (EBLR). Since October 1, 2019, SBI loans have been linked to EBLR, the SBI for home loans, personal loans, etc.
The borrowers who have taken loans linked with MCLR can switch from an MCLR-based lending rate to an EBLR-based lending rate by requesting the bank to do so after paying a fee.
