The biggest state-owned bank in India, State Bank of India (SBI), has declared that, from August 15, 2024, all of its tenants would see a 10-basis-point hike in lending rates. The bank has increased its rates for three months running, which suggests that credit requirements are becoming more stringent.
The bank uses the Marginal Cost of Funds Based Lending Rate (MCLR) as a benchmark to calculate interest rates on a variety of loans, including personal, vehicle, and home loans. The rate increase will affect this rate. Because it has a direct impact on borrowing costs, the MCLR is an essential point of reference for borrowers.
There has been an increased trend in the MCLR, indicating higher borrowing costs. The MCLR, which replaced the base rate system in April 2016, serves as a baseline for determining lending rates unless the Reserve Bank of India (RBI) approves certain exceptions. Higher MCLR rates mean that borrowers of all tenures will have to make larger loan repayments, which will increase the cost of borrowing. The move by SBI to raise rates is part of a larger trend in the banking industry of interest rates increasing due to the current state of the economy and the Reserve Bank of India’s (RBI) monetary policy stance. Both new and current borrowers are anticipated to be impacted by the rate modification, which might result in higher loan EMIs.
Check SBI’s tenor-wise MCLR, effective from August 15
| TENOR | EXISTING MCLR | REVISED MCLR |
| Overnight | 8.10% | 8.20% |
| One Month | 8.35% | 8.45% |
| Three Month | 8.40% | 8.50% |
| Six Month | 8.75% | 8.85% |
| One Year | 8.85% | 8.95% |
| Two Years | 8.95% | 9.05% |
| Three Years | 9.00% | 9.10% |
rate increases in a stable repo rate
Several significant banks have raised their lending rates lately, following similar moves by other public sector banks. Rate increases were put into effect by Bank of Baroda, Canara Bank, and UCO Bank on August 12, 2024, and August 10, 2024, respectively. The Reserve Bank of India (RBI) maintained its benchmark repo rate at 6.5% at the Monetary Policy Committee (MPC) meeting on August 8, despite these rises. Additionally, the RBI kept the bank rate at 6.75 per cent, the marginal standing facility (MSF) rate at 6.25 per cent, and the standing deposit facility (SDF) rate at 6.25 per cent.
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