The State Bank of India increased its benchmark lending rates by 20 basis points effective Saturday, PTI reported. One basis point is a hundredth of a percentage point. The increase in lending rates is applicable across all tenors up to three years.
The country’s largest lender raised the overnight Marginal Cost of Funds-based Lending Rate, or MCLR, from 7.90% to 8.10%. For one-year loans, the new rate is 8.45% as against 8.25%. The lending rate for two years will now be 8.55% instead of 8.35%, and for three years, it is 8.65% instead of 8.35%.
Banks update their lending rates based on the marginal cost of funds at the beginning of every month. The increase is expected to make home, car and other loans costlier.
The SBI’s move comes a month after the Reserve Bank of India increased the repo rate by 25 basis points to 6.5% and the reverse repo rate to 6.25%. The repo rate is the rate at which the central bank lends money to commercial banks in the event of a shortfall of funds. The reverse repo rate is the rate at which the central bank borrows money from commercial banks in India.