Fifth rate hike since April: SBI raises MCLR by 20 bps; EMIs to get dearer

State Bank of India (SBI) on Monday raised its marginal cost of funds-based lending rate (MCLR) by 20 basis points (bps) across tenures, a move that will make EMIs expensive.

MCLR for one year, which is considered important as long-term loans like home loans are linked to this rate, is now at 7.70 per cent, as per information on the lender’s website. The bank also raised MCLR for loans of other maturities — shorter maturities at 7.35 per cent, six months at 7.65 per cent, two years at 7.90 per cent and three years at 8 per cent.

It also raised the repo-linked lending rate (RLLR) and external benchmark lending rate (EBLR) by 50 bps each to 7.65 per cent and 8.05 per cent, respectively.

Since April, SBI has cumulatively hiked MCLR by 70 bps. In April, May and July, the state-run bank had raised the MCLR by 10 bps each, and in June, the same was increased by 20 bps.

Along with SBI, other banks too are raising lending rates. This comes in the wake of Reserve Bank of India (RBI) increasing benchmark policy rates by 50 bps earlier this month to tame headline inflation. The central bank has raised the policy interest rates by 140 bps since April. So far, major lenders like Bank of Baroda, ICICI Bank, Bank of India, Punjab National Bank and Yes Bank have raised their MCLR rates in the range of 5-10 bps. They have also raised their RLLR. While MCLR gets revised each month, a revision in repo rate by the RBI gets automatically reflected in the RLLR of banks.

SBI also increased interest rates on domestic term deposits of some maturities, effective August 13. For deposits below Rs 2 crore, it has raised interest rates by 15 bps. The new interest rates to be paid by the bank stand in the range of 5.45-5.65 per cent and are applicable on deposits maturing in 1 year to less than 2 years, 2 years to less than 3 years, 3 years to less than 5 years, 5 years and up to 10 years. On deposits above Rs 2 crore, the bank has increased interest rates on almost all maturities in the range of 25-100 bps.

The total deposit growth rate of the entire banking system is lagging the pace of credit growth, as per latest RBI data. The non-food credit rose 15.1 per cent year-on-year (y-o-y) as of fortnight ended July 29 to Rs 123.7 trillion while deposits grew 9.1 per cent y-o-y to Rs 169.7 trillion during the period.

RBI Governor Shaktikanta Das had said earlier that banks cannot rely on the central bank and will have raise deposits to support credit offtake.