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SBI Increases 1-year MCLR by 10 bps to 8.4% From Jan 15 - Check Here
State Bank of India (SBI) increased its 1-year marginal cost of funds-based lending rate (MCLR) by up to 10 basis points (BPS) to 8.4% on Friday.
Except in certain circumstances, the MCLR is the lowest interest rate at which a bank can lend.
Customers can expect their loans and EMIs to become more expensive as the MCLR rises. It should be noted, however, that the increase in the MCLR affects the floating interest rate rather than the fixed interest rate. When the Reserve Bank of India raises the repo rate, banks raise the lending rate, or MCLR, to pass the cost on to customers.
The bank previously raised the MCLR in December 2022. At the time, it increased the six-month and one-year MCLR from 8.05% to 8.30%. The two-year MCLR was raised from 8.25% to 8.50%, and the three-year MCLR was raised from 8.35% to 8.60%.
| Tenor | Existing (In%) | Revised (In%) |
|---|---|---|
| Over night | 7.85 | 7.85 |
| One Month | 8 | 8 |
| Three Month | 8 | 8 |
| Six Month | 8.3 | 8.3 |
| One Year | 8.3 | 8.4 |
| Two Years | 8.5 | 8.5 |
| Three Years | 8.6 | 8.6 |
Customers' EMI outgo will rise as the MCLR rises for a year. Remember that the actual increase in EMI will be determined by the amount of the outstanding loan, the remaining term of the loan, and the interest rate charged by the bank.
The MCLR was implemented to ensure that customers are treated consistently. Prior to MCLR, banks would lend to their prime customers at rates lower than the base rate while charging higher rates to others. Inflation is the primary driver of the MCLR rate hike, and more such actions are expected as the RBI continues to use its tools to keep inflation below its target range of 2-6%.
What is MCLR?
The MCLR, or marginal cost of funds-based lending rate, is the basic minimum rate at which banks can provide consumer loans. The Reserve Bank of India (RBI) established the MCLR in 2016 to determine the interest rates on various types of loans. It is used as an internal benchmark rate by banks when making loans at a reasonable and open interest rate. Banks continued to make house loans tied to the MCLR until September 30, 2019.
