Beena Parmar Moneycontrol News
Two days after a hike in deposit rates, State Bank of India (SBI) on Friday increased lending interest rates by 10 basis points (bps) across all tenures up to three years, a move that will lead to costlier loans for consumers.
Other banks are likely to follow suit as most banks are facing higher costs of borrowing from the market.
One bp is one hundredth of a percentage point.
The overnight and one-month tenure marginal cost of funds based lending rate (MCLR) have been raised to 7.90 percent (from 7.80 percent), three-month tenure rate is 7.95 percent (from 7.85 percent) while six-month tenure is 8.10 percent (from 8.00 percent) per annum, as per SBI’s website.
The new rates will be effective from June 1. The bank had last time revised its MCLR by up to 25 bps with effect from March 1, 2018.
For one, two and three years, the MCLR has been hiked to 8.25 percent, 8.35 percent and 8.45 percent, respectively.
Base rate has been kept unchanged since its last revision on April 1, 2018, from 8.65 percent to 8.70 percent.
On May 28, SBI hiked interest rates on its retail fixed deposits for short to medium term by up to 25 bps.
Rate hike impact
SBI’s home and auto loans are largely linked to one-year MCLR. However, given all tenures have seen an increase, all types of loans – ranging from personal and car loans to housing loans – will see EMIs to go up.
On a 10 bps increase in the lending rate will increase the EMI on a Rs 30-lakh housing loan taken for a period of 20 years by about Rs 200 per month (which is Rs 2,400 annually), assuming that the current rate of interest is 8.15 percent, which goes up to 8.25 percent after the increase in the lending rates.
On Thursday, Punjab National Bank (PNB) also revised the MCLR upwards for select tenors by 0.05-0.10 percentage points, effective June 1.
Benchmark Prime Lending Rate (BPLR) increased from 13.40 percent p.a. to 13.45 percent p.a. w.e.f. 01.04.2018, SBI said on its website for the older loans.
The hike comes a few days before the Reserve Bank of India (RBI) is due to announce its key policy rate decision, in which there is a 50:50 chance of a rate hike, which impacts banks' fund raising capacity.
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