State Bank of India, the country’s largest lender, on Thursday increased marginal cost-based lending rates (MCLR) across most maturities, effective immediately. SBI raised the key one-year MCLR or benchmark rate to 8.15 per cent from 7.95 per cent, according to a notification from the bank. This is the first time SBI has raised the one-year MCLR or benchmark rate since the inception of a new lending rate system in April 2016. The rate revision from SBI comes just a day after the bank raised interest rates on fixed deposits across most maturities.
MCLR is closely linked to the costs banks pay on their deposits and hence a higher MCLR is an indication in the uptick in bank deposit rates.
It is the first hike in 1-year MCLR since the adoption of MCLR as the new lending rate system in April 2016.
Other banks are likely to follow suit as typically, a deposit rate hike is followed by a lending rate hike. This indicates that the interest in the economy has moved up even as the Reserve Bank of India (RBI) in February kept its policy rates unchanged for the third time.
On Wednesday, SBI hiked its retail and wholesale deposit rates by 10 to 50 basis points (bps) across various maturity baskets.