State Bank of India (SBI) on Monday raised its benchmark lending rates by 50 basis points (or 0.5 per cent), a move that will lead to an increase in EMIs for borrowers.
The hike in lending rate comes days after the Reserve Bank of India raised its benchmark lending rate by 50 basis points to contain inflation.
The external benchmark based lending rate (EBLR) and repo-linked lending rate (RLLR) have been hiked by 50 basis points, while the marginal cost of funds-based lending rate (MCLR) has been hiked by 20 basis points across all tenors.
According to the information posted on SBI’s website, the revised rates are effective from August 15.
SBI’s EBLR rose to 8.05 per cent and RLLR by the same 50 basis points to 7.65 per cent.
Banks add credit risk premium (CRP) on EBLR and RLLR while granting any type of loan including housing and auto loans.
With the revision, the one-year MCLR increased to 7.70 per cent from 7.50 per cent earlier, while it increased to 7.90 per cent for two years and 8 per cent for three years.
Most of the loans are linked to the one-year MCLR rate.
With the increase in the lending rate, the EMI will increase for borrowers who have taken loans at MCLR, EBLR or RLLR.
With effect from October 1, 2019, all banks including SBI have moved to an interest rate linked to an external benchmark such as the RBI’s repo rate or treasury bill yield. As a result, transmission of monetary policy by banks has gained traction.