The State Bank of India has raised its marginal cost of funds-based lending rate, or MCLR, by 0.1% on all types of loans, PTI reported on Monday. The new rates came into effect from May 15.
The move will result in an increase in equated monthly instalments, or EMIs, of borrowers.
MCLR is the minimum lending rate below which a bank is not permitted to lend. It is calculated based on the duration of the time that a borrower has to repay the loan.
This is the second time in a month that the country’s largest lender has raised lending rates. On April 15 too, the bank had raised its MCLR by 0.1%. The State Bank of India accounts for nearly one-fifth of all the loans in the country.
The latest rate hike came nearly two weeks after the Reserve Bank of India raised the repo rate by 0.4% to 4.40%. The repo rate is the interest rate at which the central bank lends to commercial banks. Typically, banks and other lending institutions raise interest rates for their customers once the repo rate is hiked.
On May 4, the RBI increased the repo rate with the aim of taming India’s retail inflation which accelerated to a 17-month high of 6.95% in March. This was for the third straight month that the price rise indicator was above the central bank’s mandated upper limit of 6%. In April, the price rise indicator shot up further to an eight-year high of 7.79%.