SBI: State Bank of India, India’s largest state-run lender, raised interest rates on loans by 10 basis points across multiple tenors, w.e.f. August 15, 2024. With this increase in the interest rate on loans by SBI in August, this becomes the third straight increase and continues the upward movement that started from June 2024.
Lending Rates
Marginal cost of funds-based lending rates this way—
- Overnight MCLR: From 8.10 percent to 8.20 %.
- Now One Month MCLR: 8.35% has reached 8.45%,
- Three Month MCLR: 8.40% has increased to 8.50%,
- Six Month MCLR: 8.75% has increased to 8.85%,
- One Year MCLR: 8.85% has increased to 8.95%,
- Two Years MCLR: 8.95% has increased to 9.05%
- Three Years MCLR: 9.00% has increased to 9.10%
Understanding MCLR
MCLR is the minimum rate of interest below which a bank can’t lend other than in some specified exceptional conditions with the approval of the Reserve Bank of India. According to directions by the Reserve Bank of India, the system of MCLR was introduced in April 2016. In effect, it replaced the older workhorse—the base rate system—and sought to reflect truly what it costs a bank to raise funds for lending.
The move comes right after steps that other PSBs have been taking over the last couple of weeks. Bank of Baroda, Canara Bank, and UCO Bank revised their rates of marginal cost of funds based lending rate, making consumer loans dearer. Bank of Baroda and Canara Bank reviewed the rates effective on April 12, 2025, and UCO Bank on April 10, 2025.
Overview of SBI’s Latest MCLR Hike
Despite all these increases, the benchmark repo rate has been kept as usual by the Monetary Policy Committee of the RBI at 6.5%. The standing deposit facility rate has remained at 6.25%, while both the marginal standing facility rate and the bank rate have been placed at 6.75%. This stand of the RBI testifies to a wait-and-watch policy stance so far as monetary policy is concerned at this juncture.
However, the unabated upward move in the MCLR of major banks does reflect the overall reality of the economy and financial policies that institutions are undertaking in this complex maze of interest rates and inflation. If, in the process, banks accede to the situation, it would be costlier loans for borrowers, and doubtless, it is bound to impact both personal and business finances.