India's largest lender State Bank of India on Thursday (March 1) increased the one-year marginal cost of funds based lending rate (MCLR) by 20 basis points to 8.15 percent from 7.95 percent across various maturities.
Home loan and personal loan borrowers will be affected by the revised rates as it would affect the interest rates on loans. The Increase in MCLR rates by the largest public sector bank in India shows that the EMI (Equated Monthly Installments) will also increase.
The new benchmark rate will be effective from March 1, 2018, the bank said through a notification. The hike in MCLR rates comes a day after the bank increased fixed deposit rates of maturities.
The overnight MCLR rate has been increased from 7.70 percent to 7.80 percent, while the six-month MCLR has been increased from 7.90 percent to 8.00 percent earlier.
The two-year MCLR rate has gone up to 8.25 percent from 8.05 percent. Also, the three-year MCLR rate has been raised to 8.35 percent from 8.10 percent.
On February 28, SBI has increased the interest rate on various term deposits with immediate effect. For retail domestic deposits below Rs 1 crore, a depositor will now earn 6.40 percent interest rate on one-year deposit, from the 6.25 percent interest rate earlier. Senior citizen for the same amount of deposit and tenure will earn 6.90 percent from 6.75 percent earlier.
The proposed rates of interest shall be made applicable to fresh deposits and renewals of maturing deposits, read the SBI statement.
MCLR is the benchmark lending rate based on which banks in India lend to borrowers. Till 31 March 2016, banks used the base rate as the benchmark rate to lend.
Reuters reports that this is the first hike in the one-year MCLR after the MCLR regime came into effect in April 2016.