Loan EMI likely to increase as SBI hikes MCLR

India's largest public sector lender State Bank of India (SBI) has announced its latest marginal cost of funds-based lending rate (MCLR). The SBI MCLR rates are effective from December 15, 2023, according to the SBI website. The MCLR is the lowest interest rate at which a bank can make a loan to a customer.

As per SBI's website, the MCLR for one month has been hiked from 8.15 per cent to 8.20 per cent. Its three-month MCLR has been increased from 8.15 per cent to 8.20 per cent. The bank hiked its six-month MCLR from 8.45 per cent to 8.55 percent, and its one-year MCLR was hiked from 8.55 per cent to 8.65 per cent.  Meanwhile, SBI increased its two-year MCLR from 8.65 per cent to 8.75 per cent. Also, the bank's three-year MCLR has been increased from 8.75 per cent to 8.85 per cent.

SBI MCLR hike: Who will be impacted?

MCLR was introduced in April 2016. It refers to the minimum interest rate below which financial institutions can't lend money, except in certain cases. This is applied to home loans, auto loans, and personal loans. 

In general, a lower MCLR will lead to lower interest rates and, thus, lower EMIs for borrowers. A higher MCLR will lead to higher interest rates and higher EMIs for borrowers.

RBI’s Guidelines on MCLR

Fixed rate home loans will not be affected by MCLR.

Deposit balances and other borrowings are considered while computing the marginal cost of funds.