Why are banks increasing loan rates? What will be the effect of this increase in MCLR, Here's what Experts quote
Several banks including State Bank of India (SBI), Axis Bank, Bank of Baroda (BoB), and Kotak Mahindra Bank recently increased their MCLR. Due to this, the customers might see a spike in their EMIs. What does it behold for the consumers, here's what experts quote?
Several banks including State Bank of India (SBI), Axis Bank, Bank of Baroda (BoB), and Kotak Mahindra Bank recently increased their MCLR (Marginal Cost of Funds Based Lending Rate). is. Due to this, now you will find it expensive to take loans from these banks. With this decision of banks, your EMI will increase and it will become costly for you to take home an auto or personal loan. SBI has increased the MCLR by 10 basis points to 7.1% after three years. Whereas, Axis Bank, BoB, and Kotak Mahindra Bank have increased the MCLR by 5 bps.
Experts say that the increase in MCLR usually increases the interest payment of the borrowers. This means that customers will have to pay higher EMIs for their home loans as the reset date approaches. Auto and personal loans are also expected to become expensive due to the increase in MCLR. TradeSmart Chairman Vijay Singhania said, “The biggest fear is now before us. Inflation is already very high, and now and then, interest rates on whatever we consume are expected to rise in the times to come.”
SBI has announced an increase of 10 basis points in MCLR. SBI's rate was one of the lowest rates in the market. Singhania further said, “However, the share of MCLR is coming down and has come down from 62.9 percent in March 2021 to 53.1 percent in December 2021. Most of the retail loans, including home loans, have moved to external benchmark-linked lending rates (EBLR)," he said, adding that "even then, this hike will impact a large number of borrowers."