Banks raise lending rates by 10 basis points - EMIs will be costlier
Posted on: 02/Jun/2018 5:35:37 PM
There is adverse news for the customers who expected the prospects of a reduction in interest rates - now they should get ready to pay higher interest. The 3 largest banks in India, State Bank of India, Punjab National Bank, and ICICI have all increased their lending rates (MCLR) by 0.1%. This would directly increase the interest payable on loans.
Revision status
SBI has increased the MCLR (Marginal Cost of Lending Rate) by 10 basis points across all tenors up to 3 years.
Meantime, the 2nd largest bank in the country, ICICI has also revised MCLR by 10 basis points to 8.40% for 1 year and 3-year tenors. This will be effective from 1st June. In case the banks decide to reduce their margin, the borrowers need not have to pay more interest.
The coincidence is that this hike has been announced 4 days ahead of the Reserve Bank of India’s bi-monthly monetary policy meeting scheduled on 6th June.
SBI revisions
It is also to be noted that this is the 2nd time this year that SBI revises MCLR. SBI had raised the lending rates for 1 year by 20 basis points (from 7.95% to 8.15%) on 1st March. According to the official SBI website, the lending rates have been revised from 7.80% to 7.90% for the overnight and 1 month tenors. The new lending rate for the 3-month tenor is 7.95%. For 6-month tenor, it is 8.10%. For 1-year tenor, it is 8.25%. For 2-year tenors, it is 8.35%. For 3-year tenor, it is 8.45%.
PNB revisions
The country’s 2nd largest lender, the public sector undertaking, Punjab National Bank, has increased the MCLR for the 3-year and 5-year tenors to 8.55% and 8.7% respectively. It has also increased the base rate from 9.15% to 9.25%.
ICICI Bank revisions
ICICI bank has also raised the MCLR by 10 basis points for the 1-year and 3-year tenors. For the 5-year tenor, it has been increased to 8.70 %. At the same time, the lending rate remains unchanged in case of loans up to three months.
What is a Basis Point?
One basis point is one-hundredth of a percentage point.
What is MCLR?
- Marginal Cost of lending Rate - MCLR – includes:
- Marginal cost of funds
- Negative carry due to CRR (the 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 ultimate lending rate charged to a customer may include spread to the MCLR.
What about other banks?
The other banks may follow soon. It is a well-known matter that home and auto loans are linked to MCLR. It is worth noting here that the mortgage lender HDFC announced that with effect from 2nd June, it has increased its retail prime lending rate (RPLR), on which its adjustable-rate home loans (ARHL) are benchmarked, by 10 basis points.
Karnataka Bank also has increased its interest rates on deposits. For deposits up to Rs. 10 Crores, the interest on domestic and NRE rupee term deposits for a period of one year to two years has been revised from 7.10% to 7.25%. This means an increase of 1 15 basis points These revised rates will be effective from yesterday (1st June).
