Home Business Home Loan, Car Loan EMIs Set to Increase; Details Here

Home Loan, Car Loan EMIs Set to Increase; Details Here

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Home Loan, Car Loan EMIs Set to Increase; Details Here

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India’s largest public sector lender State Bank of India (SBI) has hiked its marginal cost of lending rate (MCLR), the bank has said in a notification. The increase of MCLR has been done by 20 basis points (bps), the lender further said. Here, it must be noted that one basis point equals to one-hundredth part of a percentage point. This means that loan interests will increase by 0.20 per cent with the SBI MCLR hike.

This hike will be implemented across all tenors, according to SBI. The hike has come into effect from August 15, and may result in an increase in the EMIs of home, car and other loans for existing and future borrowers.

Here are the tenor-wise SBI’s MCLR effective from August 15, 2022, as per the lender’s website:

Overnight: Old Rates — 7.15 per cent; New rate — 7.35 per cent

One Month: Old Rates — 7.15 per cent; New rate — 7.35 per cent

Three Month: Old Rates — 7.15 per cent; New rate — 7.35 per cent

Six Month: Old Rates — 7.45 per cent; New rate — 7.65 per cent

One Year: Old Rates — 7.50 per cent; New rate — 7.70 per cent

Two Year: Old Rates — 7.70 per cent; New rate — 7.90 per cent

Three Year: Old Rates — 7.80 per cent; New rate — 8.00 per cent

SBI has been increasing its MCLR on loans since April 2022. Earlier, SBI raised the marginal cost of lending rate by up to 10 basis points with effect from July 15, 2022. Apart from MCLR, the lender also hiked its fixed deposit interest rates, effective from August 13, Saturday.

To control inflation, the Reserve Bank of India (RBI) in early August raised the key repo rate by 50 basis points (bps), which was the second hike within two month after the central bank’s Monetary Policy Committee increased 40 basis points in off-cycle policy review in May and subsequetly by 50 basis points during the June MPC. The retail inflation in July cooled off to 6.71 per cent, which is higher than the RBI’s target limit of 2-6 per cent. However, the back to back hikes in interest rates by the central bank has helped bring down inflation from a record high in April.

What is MCLR and How it Affects Loan Interests

MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum rate of interest banks are allowed to give out loans to its customers. It was introduced by the RBI in 2016 to ensure better pricing of floating rate loans to customers.

With the increase in the MCLR, SBI home and other loan borrowers may not be happy as the interests are most likely to go up. This is applicable to both existing and future borrowers. This is because home loan interest is associated with a bank’s MCLR, and with a jump in that factor, home loan interest might also go up.

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