State Bank of India (SBI) today, (July 15) has increased its marginal cost of funds based lending rates (MCLR) by 5 to 10 basis points (BPS) for most tenures. The hike is expected to impact interest and equated monthly installments (EMIs).
It may be noted that the EMI of personal and auto loans linked to MCLR will increase, while home loans linked to the repo rate will remain unchanged. MCLR, introduced in April 2016, is the minimum interest rate below which banks cannot lend.
SBI MCLR hikes are as follows...
Overnight loan tenure: increased by 5 BPS to 8.10%
One month loan tenure: increased by 10 BPS to 8.35%
Three month loan tenure: increased by 10 BPS to 8.40%
Six month loan tenure: increased by 10 BPS to 8.75%
One year loan tenure: increased by 10 BPS to 8.85%
Two year loan tenure: increased by 10 BPS to 8.95%
Three year loan tenure: increased by 5 BPS to 9.00%
What is MCLR?
Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend. MCLR replaced the earlier base rate system to determine the lending rates for commercial banks. RBI implemented MCLR on 1 April 2016 to determine rates of interests for loans.
What are basis points?
In the finance industry, basis points, also referred to as bps or bips, are a unit of measurement that are used to describe the percentage change in the value of financial instruments or the rate change in an index or other equivalent. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. Likewise, a fractional basis point such as 1.5 basis points is equivalent to 0.015% or 0.00015 in decimal form. In most cases, basis points refer to changes in interest rates and bond yields.
Less than a month ago, around mid-June, SBI too had raised rates by 10 BPS, taking the one-year benchmark loan to 8.75%. After the latest hike, SBI shares were up 1.46% at Rs 872.20 around 11 am.