SBI hikes key one-year lending rate to 8.15%; PNB, ICICI

The State Bank of India (SBI) on Thursday raised the key one-year marginal cost of funds based lending rate (MCLR) by 20 basis points to 8.15 per cent from 7.95 per cent. India's largest public sector lender said the new MCLR will be effective from March 1, 2018. Following suit, the Punjab National Bank (PNB) and ICICI Bank also hiked the MCLR rates for loan borrowers. 

The revised one-year MCLR comes as dampener for home loan borrowers as EMIs are likely to up. Taking a cue from SBI, country's second-largest private sector lender ICICI Bank also raised the one-year MCLR from 8.2 per cent to 8.3 per cent, Indian Express reported. The PNB, which is at the centre of Nirav Modi fraud also increased one-year MCLR to 8.3 per cent from 8.15 per cent.

In November last year, SBI had slashed its marginal cost lending rates by 5 basis points to 7.95 per cent. In home loans, one-year MCLR or the benchmark lending rate is applicable. This is the first time a bank has raised the benchmark lending rate after the MCLR system came into effect in April 2016.

The SBI has also hiked MCLR across various tenors. For over night tenor, the revised MCLR is 7.80, up 10 basis points from existing 7.70. For one-month and three-month tenor, the MCLR rates have not been changed. For a six month tenor, the MCLR has been revised by 10 basis points to 8 per cent.

For two-year and three-year tenor, the new MCLR is 8.25 per cent and 8.35 per cent, respectively.

MCLR is believed to be more responsive and transparent interest rate regime where the intervals of automatic interest rate resets are pre-defined in the loan agreement. The new lending rate system is applicable on all home loans, car loans, education loans and personal loans taken after April 2016. 

All loans sanctioned after April 1, 2016 are priced with reference to the MCLR. The latter includes  marginal cost of funds, negative carry due to CRR (cost that banks incur on keeping funds with the RBI as CRR), operating costs and tenure premium (costs arising from loan commitments with a longer tenor). The final lending rate charged to a customer includes spread to the MCLR.

The hike in lending interest rates comes a day after SBI hiked the retail and bulk term deposit rates for various maturities by up to 75 basis points.