EMIs to pinch as State Bank hikes lending rate by 10 basis points across tenures

The State Bank of India (SBI) has increased its marginal cost of funds-based lending rate (MCLR) by 10 basis points (0.1%) across all tenures, effective June 15. This adjustment will result in higher EMIs for borrowers with loans linked to MCLR.

The hike sees the one-year MCLR rise to 8.75% from 8.65%, the overnight MCLR go up to 8.10% from 8.00%, and the one-month and three-month MCLR both increase to 8.30% from 8.20%. The six-month MCLR now stands at 8.65%, up from 8.55%. Additionally, the two-year MCLR has been raised to 8.85% from 8.75%, and the three-year MCLR is now 8.95%, up from 8.85%. Most retail loans, including home and auto loans, are linked to the one-year MCLR rate.

The MCLR hike does not affect borrowers with loans tied to external benchmarks like the RBI’s repo rate or Treasury Bill yield. Since October 2019, banks, including SBI, have been required to link new loans to these external benchmarks, improving monetary policy transmission.

SBI also announced on Friday that it has raised $100 million (approximately Rs 830 crore) through bonds to support business growth. The senior unsecured floating rate notes, with a three-year maturity and a coupon of secured overnight financing rate (SOFR) +95 basis points per annum, will be issued through SBI’s London branch on June 20, 2024.

These financial maneuvers by SBI come amidst a broader trend of banks adjusting lending rates in response to changes in the monetary policy landscape, aimed at ensuring better transmission of policy rates to end consumers. This adjustment will impact a significant number of SBI's borrowers, particularly those with MCLR-linked loans.