No respite for loan borrowers! Home, car loan EMIs to rise further as SBI hikes MCLR – Details

SBI loans get costlier! EMIs to increase further as bank hikes MCLR

State Bank of India (SBI) has hiked its marginal cost of funds-based lending rate (MCLR), the minimum lending rate below which a bank is not permitted to lend, by 10 basis points (bps) across all tenures. The MCLR hike is effective from today, June 15. This hike is despite the RBI holding the key interest rate or repo rate unchanged in its June monetary policy review.

MCLR on one-year tenure has been raised to 8.75% from 8.65% and on two-year tenure has been revised to 8.85% from 8.75%. While MCLR on three-year tenure is revised to 8.95% from the earlier 8.85%, as per the SBI website. The bank’s most loans are linked to one-year MCLR rate.

While giving any loans, home or auto, the banks add credit risk premium over the External Benchmarks Lending Rate (EBLR) and Repo-Linked Loan Rate (RLLR).

SBI MCLR on other tenors

SBI MCLR-based interest rates range from 8% to 8.10%. Rates for one-month and three-month tenures have increased from 8.20% to 8.30%. The six-month MCLR now stands at 8.55%, up from 8.45%.

What is the marginal cost of fund-based lending rate?

MCLR or Marginal Cost of Funds Based Lending Rate, is a benchmark interest rate used by banks to set minimum lending rates for loans. Banks determine MCLR by considering factors such as cost of funds, operational expenses, and desired profit margins. Banks periodically review and adjust MCLR to reflect changes in these factors and prevailing market conditions. As a result, it influences the interest rates charged on loans offered to customers.

How is MCLR calculated?

MCLR = Marginal Cost of Funds+Operating Costs+Tenor Premium+Spread. For instance, if the marginal cost of funds is 8%, operating costs are 0.25%, the tenor premium is 0.25%, and the spread (bank’s profit margin) is 0.5%, the MCLR would be: 8%+0.25%+0.25%+0.5%=9%.