Banks hike lending rates, EMIs to go up

State Bank of India steeply hikes deposit rates for various tenure

State Bank of India (SBI), the country's largest lender, on Thursday increased marginal cost-based lending rates (MCLR) across all maturities, effective immediately. The new lending rate system is applicable on all home loans, vehicle loans, education loans and personal loans taken after April 2016.

The Delhi-based PNB, which is firefighting the largest financial fraud in the country and staring at a possible loss of around Rs 13,000 crore, has also followed its larger per hiked its one year MCLR rate by 15 bps to 8.30 per cent.

Last time SBI has hiked its MCLR was in April 2016. The SBI raised the interest rate on FDs by 0.50 per cent.

Punjab National Bank and ICICI Bank followed suit.

SBI today revised upwards the retail deposit rates for the two years to under 10 years bracket by 0.50 percent to 6.50 percent.

The overnight MCLR rate has been increased from 7.70 percent to 7.80 percent, while the six-month MCLR has been increased from 7.90 percent to 8.00 percent earlier. With MCLR going up, the home loan rates in all probability will also shoot up unless banks reduce the mark-up (margin) in the loans. Banks generally revise MCLR on a monthly basis.

Even in the last policy review early last month, the central bank had sounded more accommodative than hawkish even though it increased its inflation forecast. Auto and education loans are also benchmarked against this rate.

Domestic bulk term deposits between Rs 1 crore and Rs 10 crore, will fetch 6.75% interest for 1 year to 455 days as against 6.25% earlier while deposits between 5 years and 10 years will now earn 6.25% as against 6% earlier.

For the third consecutive time since November, the bank on Wednesday raised its retail and bulk term deposit rates for various maturities by up to 75 basis points.

The move by SBI and PNB will surely lead to other banks increasing their benchmark lending rates.

Senior citizens with deposits of 2 years to 10 years will now get 7% as against 6.50% earlier while for deposits maturing below one year they will earn 6.9% as against 6.75% before.

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