Mumbai: South Indian Bank has announced revised Marginal Cost of Funds Based Lending Rate (MCLR) for different loan tenures. The new rates will come into effect from July 20, 2026. The bank informed the stock exchanges about the revision through a regulatory filing. However, the filing does not compare the new rates with the previous MCLR, so it cannot be concluded whether the bank has increased or reduced its benchmark lending rates.
What Is MCLR?
MCLR is the benchmark interest rate used by banks to price certain floating-rate loans. The final interest rate charged to a borrower is calculated by adding the bank's margin to the applicable MCLR.
For example, if a home loan is linked to the one-year MCLR, the interest rate will be based on that benchmark. South Indian Bank has fixed its new one-year MCLR at 9.50%, but the actual loan rate may vary depending on the borrower's credit profile and the bank's margin.
Which Loans Could Be Affected?
The revised MCLR may affect existing floating-rate loans linked to South Indian Bank's MCLR. These may include some home loans, car loans, personal loans and business loans.
Not every loan is linked to MCLR. Customers whose loans are tied to another benchmark, such as an external benchmark rate, may not see any direct impact.
Will EMI Change Immediately?
No. Existing borrowers should not expect their EMI to change on July 20 itself. MCLR-linked loans have a reset date, when the bank reviews and updates the applicable interest rate.
If the reset date falls later, the revised rate will apply only from that date. Depending on the loan agreement, the bank may either revise the EMI or keep the EMI unchanged while increasing or reducing the loan tenure.
Can EMIs Rise Or Fall?
The exchange filing only provides the new MCLR rates and does not mention the previous rates. Therefore, it is not possible to confirm whether borrowers will pay higher or lower EMIs.
If the new MCLR is higher than the earlier rate, eligible borrowers could face higher interest costs. If it is lower, they may benefit from lower borrowing costs. The actual impact will become clear only on the loan's reset date.
New MCLR Rates
South Indian Bank has fixed:
- Overnight MCLR: 8.00%
- One-month MCLR: 8.45%
- Three-month MCLR: 9.40%
- Six-month MCLR: 9.45%
- One-year MCLR: 9.50%
The one-year MCLR is the highest among the revised benchmark rates.
What New Borrowers Should Know
From July 20, these revised MCLR rates may be used as the base for eligible new floating-rate loans. However, the final interest rate will also depend on the applicant's income, repayment capacity, credit score and loan type. Borrowers should check the final lending rate, processing charges, reset period and prepayment conditions before taking a loan.
