 "How much money will you get if your bank goes bust?")
State Bank of India (SBI) has raised its marginal cost of funds-based lending rate (MCLR) by up to 10 basis points for selected tenures. The latest hike by the state-owned lender will be effective from December 15, 2023, and is expected to raise EMIs on loans linked to MCLR.
Introduced in 2016, MCLR (Marginal Cost of Funds-Based Lending Rate) is a benchmark interest rate banks use to set minimum lending rates for loan products such as home loans, car loans, and personal loans. Banks cannot lend below the MCLR for any loan duration. MCLR replaced the earlier base rate system, providing a more dynamic mechanism for setting lending rates based on changes in the cost of funds for banks.
According to the SBI website, only the overnight rate has remained unchanged. As of December 15, the MCLR for the one-year tenure has been raised to 8.65 per cent, up from 8.55 per cent. Similarly, the two-year and three-year MCLR have also been increased by 10 basis points to 8.75 per cent and 8.85 per cent, respectively.
The lending rates for one month, three months, and six months have been raised by five basis points. Here is a table of all the revised rates:
| Tenor | Existing MCLR | Revised MCLR |
| Overnight | 8% | 8% |
| One Month | 8.15% | 8.20% |
| Three Months | 8.15% | 8.20% |
| Six Months | 8.45% | 8.55% |
| One Year | 8.55% | 8.65% |
| Two Years | 8.65% | 8.75% |
| Three Years | 8.75% | 8.85% |
In the last few months, many lenders have raised their MCLR. Ahead of the Reserve Bank of India (RBI) monetary policy decision, on December 7, HDFC Bank increased its MCLR across select tenors by five basis points. ICICI Bank and Bank of India also increased its MCLR by five basis points in November.
Since October 2019, banks have been mandated by the RBI to link their retail floating rates to an external benchmark, such as the repo rate, ensuring better transmission of policy rate changes. Borrowers now have the option to refinance MCLR-linked loans to repo-linked loans for potentially more transparent and efficiently priced interest rates.
On Friday, December 8, 2023, the monetary policy committee (MPC) led by RBI Governor Shaktikanta Das kept the repo rate unchanged at 6.5 per cent for the fifth consecutive time. Ir
The SBI’s Effective Benchmark Lending Rate (EBLR) currently stands at 9.15 per cent, which includes the Base Rate (BR), Credit Risk Premium (CRP) and BSP (Business Strategy Premium). Repo Linked Lending Rate (RLLR) is 8.75 per cent including CRP. RLLR is directly linked to the RBI's repo rate, which serves as a reference for setting lending rates.
