SBI, PNB, ICICI hike lending rates; EMIs set to go up

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In MCLR-linked home loans, the rate is reset after 6/12 months as per the agreement between the borrower and the bank.

State Bank of India (SBI), the country's largest bank, fired the first salvo by increasing its lending rates across all categories of loans, including home and auto loans. This eventually gets reflected in higher lending rates as the new benchmark for loans - the marginal cost of lending rate (MCLR) - is calculated based on cost of funds.

For Rs 1 crore to Rs 10 crore bulk deposits, maturing in one year to less than two years, the bank had raised rates by 0.50 percent from 6.25 percent to 6.75 percent.

The retail rates for deposits of two years and up to 10 years have been climbed by 50bps to 6.50% from 6%. "The impact of deposit rate hike on MCLR works out to 20 bps", he added.

The State Bank raised its six-month MCLR by 10 bps to 8 per cent, while its three-year loan pricing goes up by 25 bps to 8.35 per cent.

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The two-year MCLR rate has gone up to 8.25 percent from 8.05 percent.

Indeed, one member of RBI's monetary policy committee (MPC) said a series of rate hikes may be warranted because of rising risks to inflation, while others hinted at a change in policy stance if those risks materialize, show minutes of the February meeting released on Wednesday. "Most banks are aligning themselves to market rates and to demand and supply of money", said Shanti Ekambaram, president-consumer banking, Kotak Mahindra Bank Ltd. The GDP growth for the third quarter ended December 2017 was at 7.2 per cent as against 6.5 per cent in the second quarter and 5.7 per cent in the first quarter. Their decision also signals a turn in the interest rate cycle.

The five-year MCLR, on the other hand, was raised to 8.45 percent to 8.60 percent. Credit offtake in the banking system was low in the mid-single digits till a few months ago.

The maximum increase of 50 basis points is in four maturity buckets 7 days to 45 days, 2 years to less than 3 years, 3 years to less than 5 years, 5 years and up to 10 years.