: The country’s largest government bank State Bank of India (State Bank of India, SBI) gave a big shock to its millions of customers. It is learned that the bank has already decided to increase the Marginal Difficulty Based Lending Rate i.e. MCLR for its one-year term loans. As a result, borrowing from banks will now become more expensive. Meanwhile, this new bank rate will be effective from January 15, 2022. It may be noted that after the RBI increased the repo rate, several banks increased the MCLR. This time the State Bank also walked on that path.
In this context, according to information given on the official website of SBI, the bank has increased its 1-year MCLR by 10 basis points. However, such increase in MCLR has been done only for one-year tenure loans. In this scenario, the 1-year MCLR has increased to 8.40 percent. Besides, overnight MCLR remained at 7.85 percent, 3-month MCLR at 8 percent, 6-month MCLR at 8.30 percent, 2-year MCLR at 8.50 percent and 3-year MCLR at 8.60 percent.
The EMI rate will increase by: As the MCLR increases, the EMI of the term loan is expected to increase. Basically, most consumer loans are fixed on the basis of one-year MCLR. In such a situation, auto and home loans along with personal loans may become expensive due to increase in MCLR.
What is MCLR: In this context, MCLR is a system developed by the Reserve Bank of India, based on which banks decide the interest rate for loans. Earlier, all banks used to fix interest rates for customers only on the basis of base rate.
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Repo rate hiked by 0.35 percent: Meanwhile, in a bid to curb inflation, the Reserve Bank of India hiked the repo rate by another 0.35 percentage points to 6.25 per cent in its bi-monthly monetary policy review on December 7. Meanwhile, the RBI has raised the repo rate for the fifth consecutive time since May last year. Not only this, the overall repo rate has increased from 4 percent to 6.25 percent.