India’ largest lender State Bank of India (SBI), in a recent development has raised its Marginal Cost of Funds-based Lending Rate (MCLR) for select tenures. The new rates came into came into effect starting Friday (November 15).
Revised MCLR Rates – What’s Changed?
SBI’s revised rates apply to three specific loan tenures. Here’s a breakdown of the changes:
Screengrab | sbi.co.in
For the 3-month tenure, it has been increased from 8.5 per cent to 8.55 per cent; 6-month tenure, it is adjusted from 8.85 per cent to 8.9 per cent and for 1-year tenure, the revised MCLR will be 9 per cent.
Meanwhile, the MCLR for overnight, one-month, two-year, and three-year tenures remain unchanged at 8.20 per cent, 8.20 per cent, 9.05 per cent, and 9.10 per cent, respectively.
Impact on Borrowers – Higher EMIs Expected
Whenever the MCLR is increased, it many a times leads to higher Equated Monthly Installments (EMIs) for borrowers.
This can be seen as a result that MCLR serves as the minimum rate below which banks cannot lend.
As a result of this, when these rates rise, the cost of borrowing for customers also increases. For home loans, car loans, and other financial products tied to the one-year MCLR, borrowers should prepare for slightly steeper monthly payments.
MCLR – The System Explained
Reserve Bank of India (RBI) introduced the MCLR in April 2016, replacing the earlier base rate system.
Furthermore, this method ensures that lending rates are more responsive to changes in funding costs, offering transparency and fairness to both banks and customers.
Before the MCLR, the base rate system (implemented in 2010) and the Benchmark Prime Lending Rate (BPLR) (introduced in 2003) dictated loan rates.
