SBI's MCLR Increase Could Lead To Higher EMIs
State Bank of India (SBI) recently increased its marginal cost of funds-based lending rate (MCLR) by 5-10 basis points across different time frames. This adjustment might result in higher costs for borrowers seeking consumer loans like home or auto loans.
The decision by SBI to elevate MCLR aligns with the Reserve Bank of India's recent choice to maintain the repo rate at 6.5 per cent in its latest monetary policy.
The updated rates set by SBI stand at 8.20 per cent for one month, 8.20 per cent for three months, 8.55 per cent for six months, 8.65 per cent for one year, 8.75 per cent for two years and 8.85 per cent for three years, as mentioned on the bank's website.
Dinesh Kumar Khara, the Chairman of SBI, mentioned that the MCLR hike factored in various cost elements, emphasising a limited scope for further increases in lending rates. He also indicated optimism regarding policy rates, suggesting they might not witness a rise soon. This increment in MCLR, he noted, is not expected to negatively impact loan growth.
Earlier this month, HDFC Bank also raised its MCLR on specific tenures by up to 5 bps, with revised rates falling within the range of 8.70-9.25 per cent. The likelihood of other banks following suit in hiking MCLR will largely hinge on their individual funding costs.
According to IDBI Bank's deputy managing director, Suresh Khatanhar, banks with high credit-to-deposit ratios and substantial growth needs might be inclined to raise MCLR due to increased deposit costs.
Biju E Punnachalil, Chief Risk Officer at South Indian Bank, mentioned that their bank had already increased its MCLR by 1.60 per cent starting May 2022, foreseeing limited potential for further hikes given the anticipated deposit rate stability.
Despite the RBI's repo rate surge by 250 bps since May 2022, the one-year median MCLR rose by only 152 bps during the period from May 2022 to October 2023, as per the 'State of Economy' report in RBI's November monthly bulletin.
