EMIs set to become costlier as SBI takes the lead in increasing interest rates

New Delhi, April 18

All home, auto and personal loans are set to become faster after the country’s largest bank, the State Bank of India, hiked its marginal cost of lending rate (MCLR) by 10 basis points (bps) across all loan tenors with effect from April 15.

The move comes despite the Reserve Bank of India keeping key policy interest rates unchanged in its latest policy review earlier this month. But other public sector lenders, followed by private banks, are expected to follow suit.

A hike in interest rates was in the air despite the RBI keeping the repo rates unchanged for the twelfth consecutive time in its April monetary policy review. Two months earlier, the SBI had hiked interest rates on fixed deposits for tenure less than three years by up to 15 bps. One basis point is equal to one hundredth of a percentage point.

More such hike in interest rates is likely as the high inflation will compel the RBI to raise policy interest rates in the next MPC meeting in June by up to 50 basis points. Retail inflation has breached the RBI’s upper tolerance band of six per cent for the third time this year and the food and fuel prices are only likely to climb due to the Russia-Ukraine war.

RBI’s April monetary policy meeting has signalled an imminent withdrawal of accommodation as it felt that controlling inflation should not be the priority.