State Bank of India (SBI) on Monday raised its benchmark lending rates by up to 50 basis points (or 0.5%), a move that will lead to an increase in EMIs for borrowers.
The increase in lending rate comes days after the Reserve Bank of India hiked its benchmark lending rate by 50 basis points to tame inflation.
External Benchmark based Lending Rate (EBLR) and Repo-Linked Lending Rate (RLLR) have been raised by 50 basis points while the hike in Marginal Cost of funds-based Lending Rate (MCLR) is 20 basis points across all tenure.
The revised rates are effective from August 15, as per the information posted on SBI website.
SBI's EBLR rose to 8.05% and RLLR% increased by similar 50 basis points to 7.65%.
Banks add Credit Risk Premium (CRP) over the EBLR and RLLR while giving any kind of loan, including housing and auto loans.
With the revision, one-year MCLR has increased to 7.70%, from the earlier 7.50%, while for two years it rose to 7.90% and for three years to 8%.
Most of the loans are linked to the one-year MCLR rate.
With the increase in lending rate, EMIs will go up for those borrowers who have availed loans on MCLR, EBLR or RLLR.
From October 1, 2019, all banks including SBI have migrated to an interest rate linked to an external benchmark such as RBI's repo rate or Treasury Bill yield. As a result, monetary policy transmission by banks has gained traction.