State Bank of India (SBI) has raised its marginal cost of funds-based lending rates (MCLR) by 10 basis points w.e.f. July 15. This is the second hike since last month.
The MCLR on loans of overnight, one-month and three-month tenor has been raised from 7.05 percent to 7.15 percent.
The MCLR on six-month tenure has been revised to 7.45 percent. The MCLR on loans with a tenor of one year has been raised to 7.5 percent. The corresponding rates for two-year loans is now 7.7 percent and the maximum rate has been assigned to loans with three-year loans i.e., 7.8 percent.
Last month also, SBI raised MCLR by 20 basis points on June 15, i.e., exactly a month ago.
Before June, SBI raised its MCLR by 10 basis points across all tenures effective May 15. Even in April, the bank had raised the benchmark rates by a similar quantum in April.
The lending rate hike cycle currently tracks the RBI’s repo rates which have been raised by 90 basis points in two previous monetary policy reviews.
Consequently, several banks such as HDFC Bank, ICICI Bank, Bank of Baroda, Canara Bank and Union Bank of India, among others, have already raised their lending rates.
MCLR was introduced as an alternative to the base rate system by RBI as a benchmark below which banks cannot lend to their customers. Every month, banks revise their MCLR rate depending on the market conditions.
For the uninitiated, MCLR is determined by taking into account the cost of deposit. MCLR is the benchmark for nearly 42% of the SBI’s loan book, comprising largely of loans to companies and individuals.
It is a formula-driven rate and reflects the higher cost of deposits the bank has had to pay in the last couple of months. Both the bulk deposit and term deposit rates moved up, triggering the adjustment in the MCLR.