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Loan EMIs to go up as public sector bank hikes MCLR rates

Mumbai: The largest bank in the country, State Bank of India (SBI) raised the marginal cost of the fund-based lending rate (MCLR). The public sector lender hiked MCLR rates  by 10 basis points (bps) across all tenures. The increase in MCLR by SBI comes days after the Reserve Bank of India (RBI) left the key policy rate unchanged.

SBI  has revised one year MCLR to 8.75 per cent from 8.65 per cent. Overnight MCLR has been raised to 8.1 per cent from 8 per cent. The one and three-month MCLR have been revised upwards to 8.3 per cent each from 8.2 per cent earlier. The revised MCLR for two-year and three-year MCLRs are 8.85 per cent and 8.95 per cent, respectively.

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After this rate hike, the equated monthly instalments (EMIs) of all retail loans including car, personal and home will go up.

MCLR is the minimum rate of interest banks are allowed to give out loans to its customers. It is a benchmark interest rate and it dictates the lower limit of the interest rate for a loan.

Last week, the RBI’s Monetary Policy Committee (MPC) left the repo rate – the key policy rate – unchanged at 6.5 per cent on concerns over rise in food inflation. Introduced on April 1, 2016, MCLR is the minimum interest rates below which banks cannot lend. It reflects the trends in banks’ cost of borrowing.

In 2019, the RBI introduced the external benchmark linked rate (EBLR) – which is linked to the repo rate – to further increase the pace of monetary policy transmission. Currently, all the retail loans are linked to EBLR. While any hike or cut in the repo rate gets immediately reflected in loans linked to EBLR, banks review interest rates under MCLR regime every month at a pre-announced date.



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