📷 Image Credits: Moneycontrol
State Bank of India (SBI), the country’s largest lender, has increased its marginal cost of funds-based lending rate (MCLR) by 10 basis points (0.1%) across all tenures, effective June 15. This move by SBI is poised to impact borrowers, leading to a rise in Equated Monthly Installments (EMIs) for those with loans linked to MCLR. The revised MCLR rates have been implemented, with the one-year MCLR climbing to 8.75% from 8.65%, the overnight MCLR increasing to 8.10% from 8.00%, and the one-month and three-month MCLR both bumping up to 8.30% from the previous 8.20%. In the same vein, the six-month MCLR has seen an uptick to 8.65% from 8.55%, while the two-year MCLR has been elevated by 0.1% to 8.85% from 8.75%, and the three-year MCLR now stands at 8.95% from 8.85%. Most retail loans, including housing and auto loans, are tied to the one-year MCLR rate, implying that a significant portion of borrowers will bear the brunt of this rate hike. It’s worth noting that loans linked to external benchmarks such as the RBI’s repo rate or Treasury Bill yield remain unaffected by this MCLR adjustment. The norm introduced from October 1, 2019, mandates that banks, including SBI, must lend at an interest rate linked to an external benchmark. By adhering to this, monetary policy transmission by banks has seen improved effectiveness and reach. In tandem with the MCLR revision, SBI has successfully raised USD 100 million (approximately Rs 830 crore) through bonds to fuel business growth. The raised funds through senior unsecured floating rate notes have a maturity of three years, with a coupon of secured overnight financing rate +95 bps per annum payable quarterly in arrears under Regulation-S. The bonds are scheduled to be issued via SBI’s London branch starting June 20, 2024. These strategic financial steps by SBI come in the context of wider banking trends that prioritize adjusting lending rates to align with changes in the monetary policy landscape. Through these adaptations, banks aim to enhance the transmission efficiency of policy rates to end consumers, marking a critical juncture for borrowers impacted by MCLR-linked loans.
