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Marginal Cost Of Funds-Based Lending Rates Raised

Marginal Cost Of Funds-Based Lending Rates Raised:

State Bank of India (SBI) raised the marginal cost of funds-based lending rates (MCLR) for the first time in three years, signalling that the soft rates regime that has prevailed since 2019 may be over.

  • SBI raised the MCLR by 10 basis points (bps) across tenures to 7.1% (from 7% earlier); it is now slightly lower than the 7.25% at HDFC Bank, Punjab National Bank, and ICICI Bank.
  • MCLR, which RBI instituted with effect from April 1, 2016, is the lowest interest rate that a bank or lender can offer. It is applicable to fresh corporate loans and floating rate loans taken before October 2019.
  • RBI then switched to the external benchmark linked lending rate (EBLR) system where lending rate is linked to benchmark rates like repo or Treasury Bill rates.
  • As a result of the increase in MCLR, borrowers who have taken home, vehicle, and personal loans will find their equated monthly instalments (EMIs) rising in the coming months.