Comments
State Bank of India (SBI) has increased its marginal cost of funds-based lending rate (MCLR) by 5 basis points in three tenors – three months, six months and one year.
With effect from November 15, the MCLR for three months and six months will be 8.55 per cent (8.50 per cent earlier) and 8.90 per cent (8.85 per cent), respectively.
The one-year MCLR will be 9 per cent (8.95 per cent). The MCLRs for other tenors remain unchanged. The increase in MCLR indicates a relatively higher borrowing cost for these tenors. One basis point is equal to one-hundredth of a percentage point.
According to RBI’s latest lending and deposit rates data, the one-year median MCLR of scheduled commercial banks (SCBs) remained unchanged at 8.95 per cent in October 2024 from September 2024.
Share of EBLR loans up
The share of EBLR-linked loans in total outstanding floating rate loans of SCBs increased to 57.5 per cent at the end of June 2024 from 56.6 per cent at the end of March 2024, per RBI’s monetary policy report. Concomitantly, the share of MCLR-linked loans declined to 38.6 per cent from 39.2 per cent over the same period.
“The persistence of loans linked to MCLR and other legacy rates – based on internal benchmarks and having longer reset periods – are impediments to faster monetary policy transmission,” the report said.
All floating rate rupee loans sanctioned and renewed after April 1, 2016, are priced according to MCLR, the internal benchmark for such purposes.
Further, to ensure better transmission of changes in policy repo rate, the RBI asked Banks to ensure that all new floating-rate personal or retail loans (housing, auto, etc.) and loans extended to Micro and Small Enterprises from October 1, 2019, and loans to Medium Enterprises from April 1, 2020, are linked to external benchmarks such as repo rate or 3-month/6-month Treasury Bills.
In response to the 250 basis points (bps) policy rate hike since May 2022, scheduled commercial banks (SCBs) have revised their repo-linked external benchmark-based lending rates (EBLRs) upwards.
The median 1-year MCLR) of SCBs has increased by 170 bps from May 2022 to September 2024. Consequently, the weighted average lending rates (WALRs) on fresh and outstanding rupee loans have increased by 190 bps and 119 bps, respectively, from May 2022 to August 2024.
On the deposit side, the weighted average domestic term deposit rates (WADTDRs) on fresh and outstanding rupee term deposits of SCBs increased by 243 bps and 190 bps, respectively, during the same period.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.