The State Bank of India (SBI), the country’s largest lender by assets, has increased its marginal cost of funds-based lending rate (MCLR) by 25 basis points (bps) across all tenures. With this, interest rates on home, auto, and personal loans will go up. The new rates have come into effect from today (October 15), as per the bank’s website.
The MCLR can be defined as the minimum lending rate below which a bank is not permitted to lend. This rate, therefore, affects all loans and credit card lending rates.
With the new revision, MCLR has increased from 7.35 per cent to 7.60 per cent for overnight, one-month, and three-month tenures. The lending rate for six-month tenure has been raised from 7.65 per cent to 7.90 per cent.
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The one-year rate is up from 7.70 per cent to 7.95 per cent, whereas the MCLR for two-year tenure has risen from 7.90 per cent to 8.15 per cent. The MCLR for three-year tenure has been hiked from 8 per cent to 8.25 per cent, post revision.
The new rates are:
| Tenor | Existing MCLR (In %) | Revised MCLR (In %) |
| Overnight | 7.35 | 7.60 |
| One Month | 7.35 | 7.60 |
| Three Month | 7.35 | 7.60 |
| Six Month | 7.65 | 7.90 |
| One Year | 7.70 | 7.95 |
| Two Years | 7.90 | 8.15 |
| Three Years | 8.00 | 8.25 |
Banks have started increasing MCLR after the Reserve Bank of India’s repo rate hike on September 30. At present, the repo rate is 5.9 per cent. The recent 50 bps rate hike is the fourth hike since May. The concept of MCLR was first introduced in April 2016 wherein the banks were given the formula to calculate their cost of funding and then conduct monthly reviews of their offerings across various tenors.
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Each bank calculates its MCLR by taking into account factors such as its incremental cost of raising funds (say, via deposits) and operating expenses, among others.
All existing floating-rate bank loans are linked to the MCLR or the external benchmark-based lending rate or the base rate.
