The lending rate of banks are set to rise following the 50 bps repo rate hike by the Reserve Bank of India on Friday. The immediate impact will be on floating rate loans, which are linked to the repo rate or an external benchmark.
The external benchmark-based lending rate (EBPL) for the country’s largest lender, State Bank of India, increased to 8.55 per cent effective October 1, whereas the repo-linked lending rate (RLLR) has increased to 8.15 per cent, according to the bank’s website.
SBI’s marginal cost of funds-based lending rate (MCLR) for one-year loans currently stands at 7.7 per cent, and the benchmark prime lending rate (BPLR) is at 13.45 per cent.
Banks are required to link all incremental floating rate personal, retail and MSME loans to an external benchmark from October 2019.
While this allows for better transmission to a bulk of banks’ incremental loans, lenders are also expected to increase their MCLR and Base rates in the coming weeks to ensure the hike is passed onto existing loans.