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Synopsis: The State Bank of India (SBI) has increased its marginal cost of funds-based lending rate (MCLR) by 10 basis points across all tenures, effective June 15. This adjustment will raise EMIs for borrowers with MCLR-linked loans, but does not affect those with loans tied to external benchmarks such as the RBI’s repo rate.
SBI Hikes Lending Rates, Affecting MCLR-Linked Loans
The State Bank of India (SBI) has announced an increase in its marginal cost of funds-based lending rate (MCLR) by 10 basis points (0.1%) across all tenures, effective from June 15. This change will result in higher equated monthly installments (EMIs) for borrowers whose loans are linked to the MCLR.
Details of the Rate Hike
With this hike, the MCLR rates across various tenures are adjusted as follows:
- One-year MCLR: Increased to 8.75% from 8.65%
- Overnight MCLR: Increased to 8.10% from 8.00%
- One-month and Three-month MCLR: Both increased to 8.30% from 8.20%
- Six-month MCLR: Increased to 8.65% from 8.55%
- Two-year MCLR: Increased to 8.85% from 8.75%
- Three-year MCLR: Increased to 8.95% from 8.85%
Most retail loans, including home and auto loans, are linked to the one-year MCLR rate. This increase means that many SBI customers will see a rise in their monthly repayments.
External Benchmark Loans Unaffected
It's important to note that this MCLR hike does not affect borrowers with loans tied to external benchmarks like the Reserve Bank of India's (RBI) repo rate or the Treasury Bill yield. Since October 2019, banks, including SBI, have been mandated to link new loans to these external benchmarks to improve the transmission of monetary policy.
SBI's Broader Financial Moves
In addition to the MCLR hike, SBI announced the raising of $100 million (approximately Rs 830 crore) through bonds to support business growth. These senior unsecured floating rate notes, with a three-year maturity and a coupon of the secured overnight financing rate (SOFR) plus 95 basis points per annum, will be issued through SBI’s London branch on June 20, 2024.
Implications for Borrowers
These financial adjustments by SBI are part of a broader trend among banks to align lending rates with changes in the monetary policy landscape. This alignment is aimed at ensuring better transmission of policy rates to end consumers. Consequently, a significant number of SBI's borrowers, especially those with MCLR-linked loans, will be directly impacted by this rate hike.
Conclusion
In conclusion, while the increase in the MCLR by SBI will result in higher EMIs for many borrowers, it reflects a strategic move to ensure that lending rates are in sync with the prevailing monetary policy. Borrowers with loans tied to external benchmarks remain unaffected by this change.
