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New Delhi: Due to a rise in the marginal cost of funds-based lending rates (MCLR) by the State Bank of India (SBI) by 10 basis points, the equated monthly installments (EMIs) on the car and home loans are expected to rise soon. Earlier, Bank of Baroda, Axis Bank, and Kotak Mahindra Bank had raised their MCLR by 5 basis points each. According to a report by Indian Express, the MCLR of SBI stands at 7.1 per cent. For Bank of Baroda, it is slightly higher at 7.35 per cent. Axis bank’s MCLR stands at 7.4 per cent.
According to cleartax.in, the Marginal Cost of Funds based Lending Rate (MCLR) is defined as the lending rate below which banks are not permitted to lend to their customers. They are interest rate floors. MCLR has replaced the base rate system that is used to determine the lending rates for commercial banks.
On April 1, 2016, the Reserve Bank of India (RBI) implemented MCLR in order to determine rates of interest for loans. It must be remembered that this is only an internal reference rate and it may or may not have a direct bearing on the customers of the bank.
Generally, the MCLR is revised when RBI changes the repo rate. But in the latest Monetary Policy Meeting, the central bank decided to keep the repo rate unchanged at 4 per cent for the 11th consecutive time. However, it announced that the bank will gradually change the policy stance from accommodative to neutral in the coming days.
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