SBI Revises MCLR Rates Effective From November 15; Home Loan EMIs To Go Up? The Answer Is...

The largest public sector lender, State Bank of India (SBI) has revised its Marginal Cost Of Funds Lending Rate (MCLR) rates with effect from Wednesday, November 15, 2023. Will this revision impact the home loan EMIs of borrowers? Let's Find out!

As per SBI's website, the 1-year MCLR rate is 8.55%, while the 2-year and 3-year MCLR rates are 8.65% and 8.75% respectively.

Meanwhile, six-month MCLR is at 8.45%, one-month and three-month rates are 8.15% each, and overnight MCLR is at 8%.

These rates are unchanged and hence will not have any impact on your home loan EMIs. Here's why!

SBI has kept its MCLR rates unchanged for four months now. The last change in MCLR rates was on July 15, 2023, when it hiked rates by 5 basis points across tenures.

Typically, MCLR is the minimum interest rate for term loans below which banks are not permitted to lend to borrowers. When banks revise MCLR, the interest rates on loans linked with this benchmark are also changed.

That being said, with effect from April 1, 2016, all floating rate rupee loans sanctioned and renewed were directed by RBI to be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which was introduced as the internal benchmark for banks.

However, from October 1, 2019, RBI introduced external benchmark lending rates including linking lending rates with policy repo rates. And directed the scheduled commercial banks to transmit to external benchmarks since MCLR did not deliver effective transmission of monetary policy. However, existing loans and credit limits linked to the MCLR/Baserate/BPLR will continue till repayment or renewal, as the case may be.

Accordingly, not all borrowers are affected by the change in MCLR rates of banks. However, those existing loans which are linked with MCLR rates will see a change in their EMIs if this benchmark is hiked or trimmed.

However since SBI has made no changes in MCLR rates, home loan EMIs of those who are linked with the benchmark will not have any impact.

Last month, RBI kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50% for the fourth consecutive time. Further, the standing deposit facility (SDF) rate remains unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate at 6.75%. Also, the MPC members decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.