Home loans are set to become costlier as the country's largest lender, State Bank of India (SBI), has raised its marginal cost of funds-based lending rate (MCLR), the floor rate at which banks lend.
The bank increased its lending rates by 20 basis points (bps) across all tenures up to three years. SBI's lending rates range from 8.1 to 8.65 per cent as of Saturday, according to the bank's website. The lending rates previously were in the range of 7.9-8.45 per cent.
The MCLR for one year, a benchmark rate for most retail loans, increased to 8.45 per cent from 8.25 per cent earlier. The equated monthly installment (EMI) per Rs 0.1 million will go up by Rs 14, an SBI executive said.
Saturday’s lending rate revision is the third MCLR hike for the lender in 2018 after it hiked MCLR in March (by 20 bps) and June (by 10 bps). An SBI executive said the rate revision took into account factors such as the rise in costs of funds due to a rise in deposit rates and hardening of policy rates.
SBI raised term deposits rates by 45-90 basis points across maturities in 2018. The hike in bulk deposits rates, those above Rs 10 million, has been more (up to 125 basis points).
SBI executives said emerging markets were witnessing more volatility in the past one month due to events in Turkey and Latin America. This was impacting the global currency market and driving the rupee to record new lows, they added. These developments increased risks of further hike in policy rates.
Many banks, private and public, raised their lending rates a few days after the rate hike announcement. These banks included HDFC Bank and Bank of Baroda, among others. SBI, on the other hand, had marginally raised its deposit rates on the first day of the three-day meeting of RBI’s Monetary Policy Committee. The RBI, however, in its latest annual report, expressed displeasure on the lack of effective transmission of policy rate to borrowers. The central bank said it would review the MCLR regime, which had been brought in to improve transparency in lending rates.