EMIs Becomes Expensive As SBI Raises MCLR By 20 Per cent

The State Bank of India (SBI) has raised its marginal cost of funds based lending rate (MCLR) by 20 basis points (bps) across tenures, a move that will make EMIs expensive. MCLR for one year, which is considered important as long-term loans like home loans are linked to this rate, is now at 7.70 per cent, as per information on the lender’s website. The bank has also raised MCLR for loans of other maturities – shorter maturities at 7.35 per cent, six months at 7.65 per cent, two years at 7.90 per cent and three years at 8 per cent.

Since April 2022, the country’s largest bank has cumulatively hiked MCLR by 70 basis points. In April, May and July, SBI had upped the MCLR by 10 bps each, and in June, the MCLR was increased by 20 bps.

The bank has also increased its repo-linked lending rate (RLLR) and external benchmark lending rate (EBLR) by 50 bps to 7.65 per cent.

Along with SBI, other banks are also raising lending rates. The decision comes in the wake of Reserve Bank of India (RBI) increasing benchmark policy rates by 50 bps earlier this month to tame inflation. The central bank has raised the policy interest rates by 140 bps since April. So far, major banks like Bank of Baroda, ICICI Bank, Bank of India, Punjab National Bank and Yes Bank have raised their MCLR rates in the range of 5-10 bps. The banks have also raised their RLLR. While MCLR gets revised each month, a revision in repo rate by the RBI gets automatically reflected in the RLLR of banks.

SBI also increased interest rates on domestic term deposits of some maturities, effective August 13. For deposits below INR 2 crore, the bank has raised interest rates by 15 bps. The new interest rates to be paid by the bank stand in the range of 5.45-5.65 per cent and are applicable on deposits maturing in 1 year to less than 2 years, 2 years to less than 3 years, 3 years to less than 5 years, 5 years and up to 10 years. On deposits above INR 2 crore, the bank has increased interest rates on almost all maturities in the range of 25-100 bps.

The total deposit growth rate of the entire banking system is lagging the pace of credit growth, as per the latest RBI data. The non-food credit rose 15.1 per cent year-on-year (y-o-y) as of fortnight ended July 29 to Rs 123.7 trillion while deposits grew 9.1 per cent y-o-y to INR 169.7 trillion during the period.

RBI governor Shaktikanta Das had said earlier that banks cannot rely on the central bank and will have raise deposits to support credit offtake.