State Bank of India (SBI) has upped its Marginal Cost of Funds-based Lending Rate (MCLR) across all tenors by 10 basis points with effect from August 15, 2024.
The revised six-month and one-year MCLR will be 8.85 per cent (8.75 per cent) and 8.95 per cent (8.85 per cent), respectively. This is the third month on the trot that India’s largest Bank has upped the MCLR.
This comes in the backdrop of the banking system seeing rising cost of deposits amid challenges for mobilising resources and ongoing transmission of the cumulative repo rate hike of 250 basis points (bps) undertaken during May 2022-February 2023.
This also comes in the wake of RBI’s rate-setting monetary policy, at its meeting on August 8, 2024, keeping the repo rate unchanged at 6.50 per cent.
Last Friday, Bank of Baroda (BoB), Canara Bank and UCO Bank, among others, had announced that they will up their MCLR.
BoB has increased its MCLR by 5 basis points on certain tenors with effect from August 12. The revised six-month and one-year MCLR are 8.75 per cent (8.70 per cent) and 8.95 per cent (8.90 per cent), respectively.
Canara Bank too increased its MCLR by 5 basis points across the board with effect from August 12. The revised six month and one-year MCLR are 8.80 per cent (8.75 per cent) and 9 per cent (8.95 per cent), respectively.
UCO Bank has upped its MCLR on certain tenors by 5 basis points with effect from August 10. The revised six-month and one-year MCLR are 8.80 per cent (8.75 per cent) and 8.95 per cent (8.90 per cent), respectively.
All floating rate rupee loans sanctioned and renewed with effect from April 1, 2016, were priced with reference to MCLR, which is the internal benchmark for such purposes.
Further, to ensure better transmission of changes in policy repo rate, RBI asked banks to ensure that all new floating rate personal or retail loans and floating rate loans extended to micro and small enterprises from October 01, 2019, and floating rate loans to medium enterprises from April 01, 2020, are linked to external benchmarks such as repo rate or 3-month/6-month treasury bills.
In response to the 250 bps policy rate hike since May 2022, scheduled commercial banks (SCBs) have revised their repo-linked external benchmark-based lending rates (EBLRs) upwards. The 1-year median marginal cost of funds-based rate (MCLR) of SCBs increased to 168 bps during May 2022–June 2024, according to RBI.
Consequently, weighted average lending rates (WALRs) on fresh and outstanding rupee loans increased by 188 bps and 111 bps, respectively, during May 2022 to May 2024. In case of deposits, weighted average domestic term deposit rates (WADTDRs) on fresh and outstanding deposits increased by 244 bps and 190 bps, respectively, during the same period, per central bank data.