SBI Hikes MCLR by 5-10bps: How Will It Impact Your Loans and Yearly EMIs

State Bank of India (SBI) has recently increased its marginal cost of lending rate (MCLR) by 5-10 basis points across tenures . The new rates are effective from Sunday, May 15, 2022 . This is the second rate hike by the public lender in the last one month . Following the revision of rates, you will have to shell out more for equated monthly instalment (EMI) for home loans and personal loans .

What is MCLR?

Introduced by the Reserve Bank of India (RBI) in 2016, MCLR or marginal cost of funds-based lending rate is an internal reference interest rate for banks to offer loans at a competitive and transparent rate . Simply put, MCLR is the minimum rate of interest banks are allowed to give out loans to its customers . It is usually calculated based on the loan tenure or time period in which a borrower has to repay the loan . Banks also take into account the Cash Reserve Ratio, marginal cost of funds, tenor premiums, and operational cost of the bank while deciding MCLR rates . The lenders generally review MCLR on a monthly basis .

How Will the Hike Impact Your Loans and Yearly EMIs?

The hike in MCLR rates will impact your loans and yearly EMIs in the following ways:

1. Increase in Interest Rates

After the hike in MCLR rates, the overnight, one-month, three-month MCLR rate of SBI now stands at 6.85% . It was 6.75% earlier . MCLR for six months has been raised to 7.15% from 7.05% . Similarly, MCLR for one year has been raised to 7.2% from 7.1% . MCLR for two years has been jumped to 7.4% from 7.3% . The lending rate for a three-year tenure has been climbed to 7.5% from 7.4% . This means that the interest rates on your loans will increase .

2. Increase in EMIs

The rising interest rate environment will help the bank support the margins in the near term . However, it will also increase the EMIs to be paid by the borrowers . The EMIs are directly proportional to MCLR . Higher the MCLR, higher the EMIs to be paid by the borrowers . This decision will affect those who have floating rate loans, not the fixed interest rate loans .

3. Impact on Personal Loans

The hike in MCLR rates will also impact personal loans . The interest rates of personal loans are set to increase . This decision will affect those who have floating rate loans, not the fixed interest rate loans .

4. Impact on Auto Loans

The hike in MCLR rates will also impact auto loans . The interest rates of auto loans are set to increase . This decision will affect those who have floating rate loans, not the fixed interest rate loans .

In conclusion, the recent hike in MCLR rates by SBI will impact your loans and yearly EMIs. The interest rates on your loans will increase, and the EMIs to be paid by the borrowers will also increase. This decision will affect those who have floating rate loans, not the fixed interest rate loans. It is advisable to keep a close eye on the interest rates and plan your finances accordingly.

I hope this helps. Let me know if you need anything else.