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The one-year MCLR, a key tenor to which long-term loans like home finance are linked, has been increased by 0.05 per cent to 9 per cent effective from Friday, according to a notice on SBI’s website.
State Bank of India has hiked the MCLR twice in the recent past.
State Bank of India (SBI), the country’s largest lender, has increased the marginal cost of fund-based lending rate (MCLR) in some tenors by 5 basis points, with effect from Friday. The move comes despite the fact that interest rates across the world have started coming down and the RBI is also expected to begin cutting the key repo rate in 2025.
MCLR is the cost of funds for lenders. Banks add spread to the MCLR and price their loan rates, thus a hike in MCLR most likely raises the interest rates on loans. A basis point (bp) is 100th of a percentage point.
According to a notice on SBI’s website, the one-year MCLR, a key tenor to which long-term loans like home finance are linked, has been increased by 0.05 per cent to 9 per cent effective from Friday.
The lender has hiked the MCLR twice in the recent past, amid fears that the higher cost of deposits because of the war on the liabilities side among banks will ultimately result in higher ending rates.
The bank’s Chairman C S Setty had said 42 per cent of the bank’s loan book is linked to the MCLR, while the rest is external benchmark-based.
He had also made it clear that the deposit rates have peaked in the system and the bank will not use rate as a pull factor for the customer.
SBI has also upped the MCLR in the three- and six-month tenors, and maintained it in the overnight, one-month, two-year, and three-year tenors.
On Thursday, Commerce and Industry Minister Piyush Goyal said the Reserve Bank of India (RBI) should definitely cut interest rates. He also said the average inflation in India in the last 10 years of the Modi government has been the lowest since Independence.
Addressing the latest October 2024 retail inflation number, Goyal said, “When the RBI Monetary Policy Committee came out with their recommendations last time, they also predicted inflation to spike this month. It’s not rocket science.”
In October, India’s CPI inflation jumped to a 14-month high of 6.1 per cent. It is the first time since August that inflation has exceeded the Reserve Bank of India’s 6 per cent limit. Food inflation was at 10.87 per cent.
“It’s (October 2024 inflation) not a surprise,” he said adding that the inflation number is going to fall again in December or January. “We are all smart enough to understand what’s happening; what the base effect is, what the factors are, what the festival demand was,” the minister said.
Replying to this, RBI Governor Shaktikanta Das said he would like to reserve his comments on the rate action for the December 2024 monetary policy.
The next MPC meeting is scheduled for December 4-6.
