SBI hikes MCLR by up to 10 bps, how will it impact your EMIs?

India’s largest lender State Bank of India has increased marginal cost of  fund based lending rates by 5-10 bps across all tenors which in turn will lead to an increase in the EMIs paid by borrowers. MCLR is a minimum rate below which banks are not permitted to lend. 

The hike in MCLR came at a time when the Reserve Bank of India kept its repo rate unchanged. The hike in MCLR effective from today is the first hike since July 2023. In July, the State Bank of India increased its MCLR by 5 bps across all tenors. 

The interest rates on one – and – three-month MCLRs have been revised up by 5 bps to 8.2 per cent from 8.15 per cent earlier, as per the information on the bank’s website. One basis point (bps) is one-hundredth of a percentage point.

The RBI introduced the external benchmark linked rate (EBLR) which is linked to the repo rate to speed up the pace of monetary policy transmission.  Currently, all the retail loans are linked to EBLR. Thus a hike in MCLR by the State Bank of India will directly lead to an increase in the EMI paid by borrowers. After the hike in MCLR by State Bank of India, all other lenders will also follow the footsteps and will hike MCLR going forward resulting in costlier loans for borrowers.  

So with SBI hiking MCLR, one thing is certain that EMI paid by borrowers is going to rise in the near term. And new borrowers will have to avail loans at a higher rate of interest.