State Bank of India , the country's largest lender, said on Wednesday it will increase its marginal cost of funds-based lending rate (MCLR) by 25 basis points across all tenors. Due to this latest MCLR hike, borrowers' EMI outgo will increase further. The new interest rates are effective from 15 December, 2022, as per the bank's website.
Banks have started increasing MCLR after the Reserve Bank of India hiked the key repo rate by 35 basis points to 6.25%.
This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September. In all, the central bank has raised the benchmark rate by 2.25% since May, 2022.
With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6%.
The new rates are:
With the new revision, MCLR has increased from 7.60% to 7.85% for overnight tenure.
As per the SBI website, the MCLR for one-month, and three-month tenures has been raised from 7.75% to 8.00%.
The lending rate for six-month and one-year tenures has been raised from 8.05% to 8.30%.
The MCLR for two-year tenure has risen from 8.25% to 8.50% whereas the MCLR for three-year tenure has been hiked from 8.35% to 8.60%, post revision.
Will rate hikes continue?
The primary factor which is fueling these rate hikes is inflation. Retail inflation has come down below 6% to 5.8% and it is now in the tolerable band of the RBI. The wholesale price index at 21-month low of 5.85% in November.
Banks calculate its MCLR by considering factors such as its incremental cost of raising funds (say, via deposits) and operating expenses, among other things.
All existing floating-rate bank loans are linked to the MCLR or the external benchmark-based lending rate or the base rate.
This article taken by livemint.com
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