The last interest rate hike by the Reserve Bank of India was softer at 35 basis points as compared to 50 basis points before that. Post that move, retail inflation in India has remained under the central bank's tolerance limit of 6 per cent for two straight months. As repo rate hikes meant to control inflation by buckling cashflow are expected to become less aggressive, the State Bank of India has just made home loans and EMIs more expensive.
It has increased the marginal cost of fund-based lending rate (MCLR) by 10 basis points for specific tenor. The MCLR indicates the minimum rate of interest at which a bank can lend money. This recent hike by India's top public sector lender will translate into an interest rate of 7.8 per cent for a one-year tenure, for one and three months, the MCLR is 8 per cent, for six months the rate stands at 8.3 per cent and goes up to 8.6 per cent for three years.
But SBI isn't alone, as other PSBs such as Bank of Baroda and PNB, alongside private lenders HDFC and ICICI have also made borrowing costlier. The MCLR hike makes EMIs on existing loans expensive, while new customers will be given loans as per the fresh rates by shifting them to External Benchmark Lending Rate (EBLR).
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