SBI raises lending rate by 0.1% for all warrants; NDEs will increase

The country’s largest lender, the State Bank of India (SBI), raised its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bp) or 0.1% for all mandates, a decision that will lead to an increase in EMIs for borrowers.

The SBI’s lending rate review is expected to be followed by other banks in the coming days.

With the increase, EMIs will increase for borrowers who had loans on MCLR, not for those whose loans are linked to other references.

SBI’s EBLR rate is 6.65%, while the repo-linked lending rate (RLLR) is 6.25 as of April 1.

Banks add a credit risk premium (CRP) over EBLR and RLLR while granting any type of loan, including home and auto loans.

The revised MCLR rate takes effect on April 15, according to information posted on the SBI website.

With the revision, the one-year MCLR rose to 7.10% from 7% previously.

An overnight, one-month and three-month MCLR rose 10 basis points to 6.75%, while a six-month MCLR rose to 7.05%.

Most loans are tied to the one-year MCLR rate.

At the same time, the two-year MCLR increased by 0.1% to 7.30%, while the three-year MCLR increased to 7.40%.

From October 1, 2019, all banks, including the SBI, must lend only at an interest rate linked to an external benchmark such as the RBI repo rate or Treasury bill yield. As a result, the transmission of monetary policy through banks has gained ground.

The impact of the introduction of external benchmark-based loan pricing on monetary transmission has been felt in a variety of sectors, encompassing even sectors not directly linked to benchmark-based loan pricing. external.

“Going forward, the proportion of loans linked to external benchmarks is expected to increase further, alongside a proportional decline in loans linked to internal benchmarks. Coupled with shorter reset periods, one can therefore expect expect monetary transmission to bank interest rates to further strengthen, a recently published RBI paper said.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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