State Bank of India (SBI), India’s largest bank, has hiked its marginal cost of funds-based lending rate (MCLR) by 10 basis points across tenures with effect from May 15. This is SBI’s second hike in MCLR in the last one month.
SBI’s overnight, one-month, three-month MCLR now stands at 6.85 per cent as against 6.75 per cent earlier. Similarly, the six-month MCLR stands at 7.15 per cent, one-year MCLR stands at 7.20 per cent, two-year MCLR stands at 7.40 per cent, and three-year MCLR stands at 7.50 per cent.
SBI’s hike follows the RBI’s Monetary Policy Committee decision to jack up policy Repo rate by 40 basis points to 4.40 per cent in an off-cycle meeting to tame the rising inflation. In April, SBI had increased its MCLR by 10 bps before the MPC hiked its benchmark rate by 40 basis points.
As a result of the increase in MCLR, borrowers who have taken home, vehicle, and personal loans will find their equated monthly instalments (EMIs) rising in the coming months. With the RBI set to withdraw the accommodative policy (the willingness to expand money supply to boost economic growth), lending rates are expected to rise further in the coming months.
MCLR-linked loans had the largest share (53.1 per cent) of the loan portfolio of banks as of December 2021. The rise in MCLR comes after the one-year median MCLR of banks declined by 95 bps between March 2020 and January 2022.
SBI recently increased interest rate on its bulk term deposits (Rs 2 crore and above) by 40 – 90 basis points, with effect from May 10.