State Bank of India (SBI), country’s largest lender, has raised its marginal cost of funds based lending rate (MCLR) by 5 basis points (bps) across all tenures, a move that will lead to an increase in EMIs for borrowers. With the increase, EMIs will go up for those borrowers who have availed loans on MCLR, not for those, whose loans are linked to other benchmarks.
The revised MCLR rate is effective from July 15, as per the information posted on SBI website.
With the revision, one-year MCLR has increased to 8.55 per cent, from the earlier 8.50 per cent.
Most of the loans are linked to the one-year MCLR rate.
An overnight, one-month and three-month MCLR rose by 5 bps to 8 per cent and 8.15 per cent, respectively, whereas a six-month MCLR increased to 8.45 per cent.
At the same time, two-year MCLR also increased by 5 bps to 8.65 per cent, while three-year MCLR rose to 8.75 per cent.
From October 1, 2019, all banks, including SBI, have to lend only at an interest rate linked to an external benchmark such as RBI’s repo rate or Treasury Bill yield. As a result, monetary policy transmission by banks has gained traction.
The impact of the introduction of external benchmark-based pricing of loans on monetary transmission has been felt across various sectors, encompassing even those sectors that are not directly linked to external benchmark-based loan pricing.