SBI increases interest rate on 1-year marginal cost of funds-based lending rate; home loans to get costlier

MCLR regime came into effect in April 2016 and this is the first time a bank has increased the benchmark lending rate which brought a twist in the interest rate cycle

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Mumbaikars who have always dreamt of buying their own houses will have to now arrange for some extra money for the same. As per reports, State Bank of India (SBI) has increased interest rate on 1- year marginal cost of funds-based lending rate (MCLR) by 20 basis points (bps) to 8.15% from 7.95% on Thursday.

MCLR regime came into effect in April 2016 and this is the first time a bank has increased the benchmark lending rate which brought a twist in the interest rate cycle. People who have taken loans after April 1, 2016, are linked to MCLR and most of the banks lend to retail customers on 1-year MCLR.

It is the key lending rate at which SBI pegs its retail loans, including home loans, education loans, auto loans, certain personal loans and loans against properties.

Along with SBI, ICICI Bank and Punjab National Bank increased their MCLR but by a slightly lower magnitude of 15 basis points. Some lenders such as HDFC Bank will review rates next week.

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