EMIs on loans set to increase as SBI hikes lending rates by 10 bps across tenures

SBI said the new rates effective from Thursday (August 15), will result in higher equated monthly instalments (EMIs) for borrowers with loans linked to the MCLR.

The one-year MCLR has increased from 8.85 percent to 8.95 percent, according to SBI's website.

As per reports, the MCLR, which was introduced in 2016 to provide a more transparent way of determining lending rates in line with the cost of funds, represents the minimum interest rate below which banks are not permitted to lend and is reflective of trends in banks’ cost of borrowing.

Most retail loans, including home and auto loans, are tied to the MCLR rate, meaning borrowers will see a hike in their EMIs as these rates adjust.

Borrowers with MCLR-linked loans will experience these changes based on their loan reset periods, after which the revised rates will apply, according to reports.

This development follows the Reserve Bank of India's (RBI) decision to keep the repo rate unchanged at 6.5 percent for the ninth consecutive time, as announced earliest this month by the monetary policy committee (MPC) led by the central bank's Governor Shaktikanta Das.