State Bank of India (SBI) has increased the marginal cost lending rate (MCLR) by 10 basis points. Along with SBI, Bank of Baroda (BOB), Axis Bank, and Kotak Mahindra Bank have also increased their MCLR by 5 basis points. This will have a direct impact on home loans as well as all types of loans and escalate loan repayment cost.

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MCLR is the minimum interest rate at which a bank can lend. In other words, MCLR is a scale fixed on the basis of which a commercial bank fixes the interest rate on a loan. The shorter the MCLR is, the less will be the risk to the banks. That's why banks keep rates low for short periods. The risk is also high in loans of more capital, in such a situation, their value is also high.
Among all types of bank loans, MCLR-linked loans account for around 33%.

Which bank has increased the MCLR by how much? And how is it going to affect borrowers?
SBI - It has increased its MCLR by 10 basis points. The increased rates have come into effect from April 15. This decision of the bank will have the biggest impact on the home, auto, and personal loan borrowers.

Whereas Bank of Baroda (BOB), Axis Bank, and Kotak Mahindra Bank have increased their total by 5 basis points.

Even though the rate may not have increased in the RBI policy rate on April 8, the Reserve Bank of India has definitely given indications of further increase. And this is the reason why banks have started increasing MCLR.

With the increase in MCLR, all types of loans are believed to be expensive.

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