In a move likely to impact borrowers, one of the country's largest lenders has increased its benchmark interest rate for all loan tenors. State Bank of India (SBI), which has over 40 crore customers, has raised its Marginal Cost of Funds Based Lending Rate (MCLR) by 0.10% for different duration loans.
The MCLR is the internal benchmark rate used by banks to price loans based on the marginal cost of funds. SBI has increased the MCLR on overnight and one-month loans to 8.20% and 8.45% respectively from the earlier rates. Similarly, the lending rate for six-month loans now stands at 8.85%, up from 8.75%. Borrowers taking one-year loans will pay an annual interest of 8.95%, while rates for two and three-year loans have been hiked to 9.05% and 9.10%.
The move comes less than a week after the Reserve Bank of India left its repo rate, the key policy rate at which it lends to banks, unchanged at 6.50%. This is the third consecutive month that SBI has raised its MCLR across maturities ranging from 0.10% to 0.30% so far this calendar year. Banks are known to review lending benchmarks periodically keeping in view the cost of funds and macroeconomic environment.
The hike is likely to push up EMIs for both existing and prospective customers opting for loans linked to MCLR. With interest rates in an upward trajectory, borrowers may face higher repayment burden going forward. How the increased costs will impact demand as well remains to be seen.
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