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The State Bank of India (SBI) has announced an increase in its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) across all loan tenures. The new rates are effective from June 15, yesterday.

What Does Change In SBI's MCLR Indicate? This means that the minimum interest rate at which SBI can lend has gone up, even though the Reserve Bank of India (RBI) did not change its key interest rate in its recent policy review.

What Is SBI's New MCLR?After a spike in lending rates, the new MCLR rates are as follows:

- For one-year tenure, the rates are increased from 8.65 per cent to 8.75 per cent.
- For two-year tenure, the rates are increased from 8.75 per cent previously to 8.85 per cent.
- For three-year tenure, the MCLR rates increased from 8.85 per cent to 8.95 per cent.

Apart from the above changes, the largest banking institution has also changed MCLR for shorter-term loans. Here's the breakdown:

- For one-month and three-month tenures, the rates increased from 8.20 per cent to 8.30 per cent.
- For six-month tenure, the rates increased from 8.45 per cent to 8.55 per cent.

What Is MCLR Rates?MCLR, or Marginal Cost of Funds Based Lending Rate, is the lowest interest rate that a bank can charge for a loan.

How Is MCLR Determined?It is determined by various factors including the bank's cost of funds, operational expenses, and desired profit margins. Banks review and adjust MCLR regularly to keep up with changing market conditions.

How Change In MCLR Affects Loan Borrowers?The hike in MCLR will likely result in higher loan EMIs for borrowers.

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