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On Thursday, State Bank of India (SBI) has raised its marginal cost of lending rate (MCLR) by 20 basis points. The lead lenders of the country including Industrial Credit and Investment Corporation of India (ICICI) bank and Punjab National Bank (PNB) has also announced an increase in lending rates.

This announcement will directly affect the home loan and make it bit expensive.

ICICI Bank and PNB increased their MCLR by 15 basis points starting by March 1, the Housing Development Finance Corporation (HDFC) Bank will review rates by next week.

SBI said 40 basis points, MCLR for most borrowers and 35 basis points for women borrowers (100 basis points equal a percentage point).

ICICI bank has increased the MCLR to 8.3 percent and overnight MCLR to 7.95 percent; whereas PNB said its home loans will cost 8.6% for most borrowers, while for women borrowers will be at 8.55%.

To reduce policy rates, the government has been looking a lower interest rate and has frequently nudged the Reserve Bank of India (RBI).

The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank. MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank – on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower.

- by Accomodation Times