For the first time in over two years, banks have started increasing the interest rates, indicating a change in the rate cycle.
The country’s largest lender, the State Bank of India , and the largest private sector bank, ICICI Bank, increased lending rates by up to 20 bps — a move that will increase equated monthly installments for home, car loans for its customers.
Home loan interest rate is linked to the bank’s MCLR. With MCLR going up, the home loan rates in all probability will also shoot up unless banks reduce the mark-up (margin) in the loans.
SBI MD P.K. Gupta clarified that while MCLR has gone up by 20 bps, home loan rates for up to ₹30 lakh — that is the affordable housing segment — the increase will be limited to 5 bps.
The SBI and the Punjab National Bank have also increased the deposit rates by up to 50 bps across various tenures.
SBI, which accounts for more than a fifth of India’s banking assets, raised the key 1-year MCLR to 8.15 percent from 7.95 percent, according to a notification on Thursday.
It is the first hike in the 1-year MCLR since the inception of the new lending rate system in April 2016, according to Thomson Reuters data. Other lenders like ICICI Bank and Punjab National Bank have also raised their MCLR but by a slightly lower magnitude of 15 basis points. Some lenders such as HDFC Bank are due to review rates next week.
With MCLR going up, the home loan rates in all probability will also shoot up unless banks reduce the mark-up (margin) in the loans.