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SBI MCLR Hike: You have to shell more for equated monthly instalment (EMI) for home loans and personal loans. Know How it SBI’s latest jump in MCLR will impact your
- Last Updated:May 16, 2022, 10:24 IST
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State Bank of India or SBI has increased its marginal cost of lending rate (MCLR) by 10 basis points across tenures. The new rates will be effective from Sunday, May 15. This is the second hike by the public lender in last one month. Following the revision of rates, you have to shell more for equated monthly instalment (EMI) for home loans and personal loans.
With the latest rise in MCLR rates, the overnight, one-month, three-month MCLR rate of SBI now stand at 6.85 per cent. It was 6.75 per cent earlier. MCLR for six months, has been risen to 7.15 per cent from 7.05 per cent. Similarly, MCLR for one year has been raised to 7.2 per cent from 7.10 per cent. MCLR for two years has been jumped to 7.4 per cent from 7.3 per cent. The lending rate for three-year tenure has been climbed to 7.5 per cent from 7.4 per cent.
What is MCLR?
Introduced by the Reserve Bank of India (RBI) in 2016, MCLR or marginal cost of funds-based lending rate is an internal reference interest rate for banks to offer loans at a competitive and transparent rate. Simply put, MCLR is the minimum rate of interest banks are allowed to give out loans to its customers. It is usually calculated based on the loan tenure or time period in which a borrower has to repay the loan. Banks also take into account the Cash Reserve Ratio, marginal cost of funds, tenor premiums and operational cost of the bank while deciding MCLR rates. The lenders generally review MCLR on a monthly basis.
Why Banks Are Increasing MCLR
The central bank has recently increased repo rate by 40 basis points or 4.40 per cent in an off-cycle meeting to manage the soaring inflation. Following the rise in repo rate, several public and private sector banks are increasing their MCLR. The lenders have started escalating MCLR in anticipation of repo rate hike before the formal announcement of RBI, considering 17-month inflation numbers in March, 2022. The MCLR will continue to surge further as the hike in the repo rate has pushed the cost of the funds for banks.
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Source: News18