The State Bank of India (SBI), the country’s largest state-owned bank, has announced a 10 basis point increase in its lending rates, effective from August 15, 2024. This is the third consecutive month SBI has raised its rates, reflecting a trend of tighter credit conditions. This adjustment affects the Marginal Cost of Funds Based Lending Rate (MCLR), which serves as the benchmark for setting interest rates on various loans, including home, auto, and personal loans.
The recent hike in the MCLR signals an increase in borrowing costs. Since its introduction in April 2016, the MCLR has replaced the base rate system and is now used to determine lending rates, unless exceptions are approved by the Reserve Bank of India (RBI). As the MCLR rises, borrowers will face higher loan EMIs, making loans more costly.
Updated MCLR Rates Effective August 15:
This rate hike is part of a broader trend in the banking sector, with several major banks also raising their lending rates. Bank of Baroda and Canara Bank adjusted their rates starting August 12, 2024, while UCO Bank made changes from August 10, 2024. Despite these increases, the RBI has kept its benchmark repo rate steady at 6.5% as of the August 8 Monetary Policy Committee (MPC) meeting. The RBI also maintained the standing deposit facility (SDF) rate at 6.25%, and the marginal standing facility (MSF) rate and the bank rate at 6.75%.
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