State Bank of India (SBI) has raised the marginal cost of funds based lending rates, MCLR, with effect from Friday. The tenures for which the interest rates have risen are three months, six months and one year.
The bank now charges 8.55 percent on its 3-month tenure instead of 8.5 percent, 8.9 percent instead of 8.85 percent and 9 percent instead of 8.95 percent.
For the rest of the tenure, the interest rates continue to be the same. These are the latest MCLR rates which came into effect from Friday.
It is worth recalling that recently HDFC Bank also raised its MCLR by 5 basis points across three tenures: overnight, one month and 3 years. The private lender charges 17.95 percent as Benchmark PLR and 9.45 percent as base rate with effect from Sept 9.
What is MCLR?
MCLR is the marginal cost of funds-based lending rates below which banks are not supposed to give loans at. In 2016, the banking regulator Reserve Bank of India (RBI) replaced the base rate system with this system.
However, those borrowers who had taken loans before 2016 are still governed by the base rate or benchmark prime lending rates (BPLR) as the case may be.
The BPLR was introduced in 2003 before being replaced in 2010 by the base rate. The current interest rate regime is dictated by the MCLR which – as mentioned above – was rolled out in April 2016. SBI charges 15.15 percent as Benchmark PLR w.e.f. June 15, 2024 and 10.40 percent as base rate with effect from Sept 15, 2024.
When MCLR rates are raised, EMIs for loans also generally go upward. Since MCLR rates are far more dynamic, any tweak in these rates trigger change in the interest rates, thereby influencing the loan EMIs.
