Starting August 15, your home or auto loan EMIs may start rising. This is because the State Bank of India (SBI) has once again increased its marginal cost of funds-based lending rate (MCLR) by 10 basis points (bps) for certain loan durations. The last time SBI made such a change was in June this year.
What are the new MCLR rates?
SBI’s one-year MCLR, which directly influences many loan types, has risen from 8.85% to 8.95% from August 15, 2024. This increase means if your loan is linked to the one-year MCLR, you’ll see an uptick in your interest payments. Here’s a breakdown of the updated MCLR rates across different tenures:
Overnight MCLR: Increased from 8.10% to 8.20%
One-month MCLR: Now at 8.45%, up from 8.35%
Three-month MCLR: Rises from 8.40% to 8.50%
Six-month MCLR: Moves up from 8.75% to 8.85%
One-year MCLR: Adjusted to 8.95% from 8.85%
Two-year MCLR: Now set at 9.05%, up from 8.95%
Three-year MCLR: Increased from 9.00% to 9.10%
Which loans are affected?
If you’ve taken an auto loan from SBI, it’s tied to the one-year MCLR. With the new rate of 8.95%, your car loan EMI will rise. Similarly, if you have a personal loan, it’s linked to the two-year MCLR, which is now 9.05%.
Take a look at the current interest rates:
Auto loans (tied to one-year MCLR): Rate increased from 8.85% to 8.95%
Personal loans (tied to two-year MCLR): Rate increased from 8.95% to 9.05%
Home loans: Typically tied to the one-year MCLR, expect your EMI to reflect the 8.95% rate.
These changes are significant for borrowers, as even a small increase in interest rates can lead to higher overall payments over the loan tenure. For instance, a 10 bps increase on a Rs 50 lakh home loan over 20 years could result in thousands of rupees in additional interest payments.
What is MCLR?
MCLR, or Marginal Cost of Funds based Lending Rate, is the minimum rate below which a bank cannot lend. It replaced the earlier base rate system in 2016 to make the loan interest rates more responsive to the RBI’s policy changes. In simple terms, MCLR is a benchmark that banks use to set their lending rates, taking into account factors like the cost of funds and the loan tenor.
How is MCLR calculated?
MCLR is calculated based on several key factors:
1. Loan tenor: The length of the loan affects the rate. Longer loans typically have higher MCLR because they carry more risk for the bank.
2. Marginal cost of funds: This includes the cost of raising funds, such as interest on deposits, and is a major component of MCLR.
3. Operating costs: These are the costs associated with providing the loan, excluding those recovered through service charges.
4. Negative carry-on account of CRR: This occurs when the return on the bank’s CRR balance is zero, impacting the bank’s ability to earn from these reserves.
Banks calculate MCLR internally based on these factors and then add a spread to determine the actual lending rate. This process ensures that the MCLR reflects the bank’s cost of funds and the risks associated with lending.
What about SBI’s other rates?
While SBI’s MCLR rates have increased, their external benchmark lending rates (EBLR) remain steady at 9.15%. This rate is directly linked to the RBI’s repo rate, which has stayed unchanged at 6.5%. Your home loan, if it’s tied to the EBLR, will have an interest rate between 8.50% and 9.65%, depending on your CIBIL score.
SBI’s base rate is also steady at 10.40%, and the Benchmark Prime Lending Rate (BPLR) is at 15.15%, both effective from 15 June 2024. Additionally, the bank has revised its fixed deposit interest rates for amounts above and below ₹3 crore.
Are there any changes to Fixed Deposit rates?
Yes, along with the adjustments in lending rates, SBI has also revised its fixed deposit (FD) interest rates. These changes, effective from June 15, 2024, apply to deposits both above and below Rs 3 crore. Here’s a breakdown of the new rates:
For the general public:
7 days to 45 days: 3.5%
46 days to 179 days: 5.5%
180 days to 210 days: 6.25%
211 days to less than 1 year: 6.5%
1 year to less than 2 years: 6.8%
2 years to less than 3 years: 7.0%
3 years to less than 5 years: 6.75%
5 years and up to 10 years: 6.5%
For senior citizens:
7 days to 45 days: 4.0%
46 days to 179 days: 6.0%
180 days to 210 days: 6.75%
211 days to less than 1 year: 7.0%
1 year to less than 2 years: 7.3%
2 years to less than 3 years: 7.5%
3 years to less than 5 years: 7.25%
5 years and up to 10 years: 7.50%
These FD rate revisions mean that while you might be paying more on your loans, you could also earn a bit more on your savings, especially if you’re a senior citizen. This could be an opportunity to lock in higher rates on long-term deposits.
First Published: Aug 15 2024 | 4:17 PM IST
