State Bank of India (SBI) on Monday raised its benchmark interest rates by up to 50 basis points (or 0.5 percent), a move that will lead to an increase in EMIs for borrowers.
The rise in borrowing rates comes days after the Reserve Bank of India raised its benchmark rate by 50 basis points to contain inflation.
The external benchmark-based lending rate (EBLR) and the repo-linked lending rate (RLLR) increased by 50 basis points, while the marginal cost of fund-based lending rate (MCLR) increased by 20 basis points across all maturities.
The revised rates are effective August 15, according to information on the SBI website.
SBI’s EBLR rose to 8.05 percent and the RLLR rose about 50 basis points to 7.65 percent.
Banks add Credit Risk Premium (CRP) to the EBLR and RLLR while providing any kind of loan, including housing and auto loans.
With the revision, the one-year MCLR has risen to 7.70 percent from its previous 7.50 percent, while rising to 7.90 percent over two years and 8 percent over three years.
Most loans are linked to the one-year MCLR rate.
With the increase in the borrowing rate, EMIs will rise for those borrowers who have used loans on MCLR, EBLR or RLLR.
As of October 1, 2019, all banks, including SBI, have migrated to an interest rate linked to an external benchmark such as the RBI repo rate or Treasury bond yield. As a result, the pass-through of monetary policy by banks has gained momentum.