State Bank of India (SBI) on Monday raised interest rates by 50 basis points, or 0.5%, in a move that will push up borrowers’ PMIs.
The loan rate hike came days after the Reserve Bank of India raised interest rates by 50 basis points to curb inflation.
The External Benchmark Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR) have been raised by 50 basis points, while the Fund-Based Lending Rate (MCLR) has increased marginal cost by 20 basis points over all tenors.
The revised fares will take effect on August 15, according to information posted on the SBI website.
SBI’s EBLR rose to 8.05%, while RLLR rose by a similar 50 basis points to 7.65%.
Banks increase their credit risk premium (CRP) through EBLR and RLLR while making any type of loan, including home and auto loans.
With the revisions, the one-year MCLR has been increased to 7.70% from the previous 7.50%, while the two-year MCLR has increased to 7.90% and the three-year MCLR to 8%.
Most loans are compounded at one-year MCLR rates.
As lending rates rise, so do EMIs for those borrowers who took out loans on MCLR, EBLR or RLLR.
From October 1, 2019, all banks, including SBI, switched to using rates linked to external benchmarks such as the RBI repo rate or Treasury bill yields. As a result, the bank’s monetary policy transmission has gained traction.