EMIs may go up as SBI hikes MCLR for the first time in 2 years

As an existing or a new home loan borrower, if you are expecting a reduction in home loan interest rates, you could be disappointed. State Bank of India, the country's top lender by assets, on Thursday raised marginal cost-based lending rates (MCLR) across most maturities, effective immediately. Home loan interest rate is linked to the bank's MCLR. With MCLR going up, the home loan rates in all probability will also shoot up unless banks reduce the mark-up in the loans. It is the first hike in the 1-year MCLR since the inception of a new lending rate system in April 2016, according to Thomson Reuters data. Other lenders like ICICI Bank and Punjab National Bank have also raised their MCLR but by a slightly lower magnitude of 15 basis points. Some lenders such as HDFC Bank will review rates next week. After moving to the MCLR system, there is always the risk of any upward movement of interest rates before you reach the reset period. Further, if the RBI raises repo rates, MCLR, too, will move up.All bank loans, including home loans, taken after April 1, 2016, are now linked to the bank's marginal cost of funds based lending rate (MCLR). Banks may or may not lend at MCLR. They may ask for a spread or a mark-up. The actual home loan interest rate can be equal to the MCLR or have a 'mark-up' or 'spread', but can never be lower than the MCLR.SBI has a spread of 40 basis points over the MCLR for most borrowers and 35 basis points for women borrowers (100 basis points equal a percentage point).SBI, which accounts for more than a fifth of India's banking assets, raised the key 1-year MCLR to 8.15 percent from 7.95 percent, according to a notification on Thursday.Banks are raising interest rates even though the central bank is leaving its rates unchanged, as risks such as surging bond yields and more provisioning requirements erode their profit.On Wednesday, SBI raised interest rates on domestic bulk term deposits across most maturities.Marginal Cost of Funds based Lending Rate (MCLR) with effect from-01.03.2018Tenor-wise MCLR effective from 1st March, 2018 will be as under: 63126578

from The Economic Times http://ift.tt/2GTZ3mQ