State Bank of India, which owns more than a fifth of all outstanding loans in the country, on Monday raised its marginal cost of funds-based lending rate (MCLR) for the second time this fiscal, pointing to rising consumer borrowing costs amid hardening inflation and policy rates, reported The Economic Times.
SBI said its MCLR has been increased 10 basis points across all tenures effective May 15. The bank last raised the benchmark rates by a similar quantum in April.
Following the latest increase, the one-year MCLR now stands at 7. 20%, six-month MCLR at 7. 15% and three-month MCLR at 6. 85%.
MCLR is determined by taking into account the cost of deposit. MCLR is the benchmark for about 42% of the bank’s loan book, consisting largely of loans to companies and individuals, said Alok Kumar Choudhary, deputy managing director, finance, at the bank.
“This is a formula-driven rate and reflects the higher cost of deposits the bank has had to pay in the last couple of months,” Choudhary said. “Both our bulk deposit and term deposit rates have moved up, leading to this adjustment in the MCLR."
SBI’s rate action follows RBI’s first increase in policy rates since 2018, as India’s consumer price inflation rose to an eight-year high of 7.79% in April.
Other banks have also started raising lending rates within days of RBI’s rate action on May 4. All major banks Punjab National Bank, Bank of Baroda, ICICI Bank and HDFC Bank have increased their lending rates.
SBI, though, has not yet increased its external benchmark linked lending rate (EBLR) to which most of the new individual loans and corporate advances are linked. EBLR is linked to the RBI repo rate, or to the short-term treasury bills. Choudhary said EBLR will also have to adjust to the current rate environment.