New Delhi: According to news reports, the State Bank of India (SBI), the country’s largest public lender, has raised its marginal cost ratio (MCLR) by 10 basis points (bps) for all loan maturities.
A basis point is equal to one hundredth of a percentage point. The increase will take effect on April 15, 2022.
According to SBI, this increase will be implemented across all maturities and may result in an increase in EMIs on home, auto and other loans for existing and prospective borrowers.
Tenor MCLR effective April 15:
Overnight: Existing Rate – 6.65%; New rate – 6.75 percent
One Month: Existing Rate – 6.65 percent; New rate – 6.75 percent
Three Months: Existing Rate – 6.65 percent; New rate – 6.75 percent
Six Months: Existing Rate – 6.95 percent; New rate 7.05 percent
One Year: Existing Rate – 7.00 percent; Original price 7.10 percent
Two years: Existing Rate – 7.20 percent; New price 7.30 percent
Three Years: Existing Rate – 7.30 percent; Original price 7.40 percent
Aside from SBI, another public sector bank, the Bank of Baroda (BoB), has also announced an increase in the marginal cost interest rate.
The BoB increased the marginal cost of fund-based lending rates by 5 basis points across all maturities. The benchmark 1-year MLCR is now 7.35 percent effective April 12, 2022.
What is MCLR?
MCLR or Marginal Cost of Funds Based Lending Rate is a reference rate, meaning it is the minimum rate that banks can offer to lend to their customers. This was introduced by the Reserve Bank of India (RBI) in 2016. The new RBI policy replaced the base rate for commercial banks to set lending rates.
The marginal cost of funding is an important factor in determining the MCLR. All changes in key interest rates, e.g. Factors such as the repo rate that affect the marginal cost of funding affect the MCLR. When their home loan repricing date arrives, the increase in MCLR will be reflected in their EMIs (equivalent monthly rate). The RBI left interest rates unchanged at its monetary policy meeting (MPC) on April 8th. The announcement of the SBI MCLR hike comes days after the RBI left the repo rate unchanged at 4 percent at its MPC meeting.