SBI raised Marginal Cost of funds Lending Rates (MCLR) by 0.2% on Saturday, an increase in 20 basis points across all tenors. Owing to the increased repo rates at 25 basis points. However it also increased the term rate deposits (> ₹1 cr) by 5 -10 basis points in July this year.
Lending rates
SBI‘s overnight and monthly tenor rates was increased from 7.9% to 8.1%. The MCLR for 1 year was increased from 8.25% to 8.45%. One year MCLR usually include retail loans. The MCLR for 2 years tenor was raised from 8.35% to 8.55% while the MCLR for 3 years was raised from 8.45% to 8.65%.
Other banks are assumed to follow suit. Hence home loans and auto loans are bound to get costlier.
Repo rates
The RBI raised repo rates by 25 basis points to 6.5% last month owing to factors like volatile oil prices, monsoons, MSP. In June this year the RBI again raised repo rates by 25 basis points to 6.25%.
Banks therefore have no choice but to offload them to its customers.
Deposit rates
For deposits from 1 year to less than 2 years, the rates were increased from 6.65% to 6.70% (increase in 5 basis points). For deposits for 2 years and lesser than 3 years the rates were increased from 6.65% to 6.75%. Similarly for deposits for 3 years and lesser than 5 years the rates were increased from 6.70% to 6.80%. This accounted for an increase in 10 basis points.
The deposit rates were increased because of rising credit demand and slowing deposit accumulation.