Loan EMIs on the rise! SBI increases MCLR by up to 10 basis points
State Bank of India (SBI) has increased the marginal cost of fund-based lending rate (MCLR) by up to 10 basis points for select tenors. The latest rate hike by the state-owned lender will come into effect on December 15, 2023 and is expected to increase EMIs on loans linked to MCLR.
Introduced in 2016, MCLR (Marginal Cost of Funds-Based Lending Rate) is a benchmark interest rate that banks use to set minimum interest rates for loan products such as home loans, car loans and personal loans. Banks cannot grant loans under the MCLR for any term. MCLR replaced the previous base rate system and provided a more dynamic mechanism for setting interest rates based on changes in the cost of funds for banks.
According to the SBI website, only the daily allowance rate has remained unchanged. With effect from December 15, the MCLR for the one-year tenure has been increased from 8.55 percent to 8.65 percent. Similarly, the two-year and three-year MCLR have also been increased by 10 basis points to 8.75 percent and 8.85 percent respectively.
The interest rates for one month, three months and six months have been increased by five basis points. Here is a table with all revised rates:
| Tenor | Existing MCLR | Revised MCLR |
| Overnight stay | 8% | 8% |
| One month | 8.15% | 8.20% |
| Three months | 8.15% | 8.20% |
| Six months | 8.45% | 8.55% |
| A year | 8.55% | 8.65% |
| Two years | 8.65% | 8.75% |
| Three years | 8.75% | 8.85% |
In recent months, many lenders have increased their MCLR. Ahead of the Reserve Bank of India's (RBI) monetary policy decision, HDFC Bank on December 7 increased its MCLR across select maturities by five basis points. ICICI Bank and Bank of India also increased their MCLR by five basis points in November.
Since October 2019, banks have been instructed by the RBI to link their variable retail rates to an external benchmark, such as the repo rate, to ensure better transmission of policy rate changes. Borrowers now have the option to refinance MCLR-linked loans into repo-linked loans at potentially more transparent and efficiently priced interest rates.
On Friday, December 8, 2023, the Monetary Policy Committee (MPC) led by RBI Governor Shaktikanta Das kept the repo rate unchanged at 6.5 percent for the fifth time in a row. Ir
The SBI's Effective Benchmark Lending Rate (EBLR) currently stands at 9.15 percent, which includes the Base Rate (BR), Credit Risk Premium (CRP) and BSP (Business Strategy Premium). Repo Linked Lending Rate (RLLR) is 8.75 percent including CRP. RLLR is directly linked to the RBI's repo rate, which serves as a reference for fixing interest rates.