Loan from this bank becomes expensive! You will have to pay more for personal, car and home loans than now

SBI Hikes Lending Index: The country's largest government bank SBI has shocked crores of its customers. The bank has increased the MCLR rate from November 15. The increase in MCLR rates has a direct impact on your personal loan, car loan and home loan EMI. The bank has increased the interest rates by 0.05 percent. This is the second time recently that the bank has increased MCLR rates.

• State Bank of India increased loan interest rates
• SBI increased MCLR on loans by 0.05 percent
• MCLR is important for long term loans like buying a house

What are the latest MCLR rates?
According to the official website of State Bank of India, the bank has revised the MCLR rates for 3 months, 6 months and 1 year. In which the 3 month rate has been increased from 8.50 percent to 8.55 percent, the 6 month rate has been increased from 8.85 percent to 8.90 percent and the 1 year rate has been increased from 8.95 percent to 9.00 percent.]

SBI has also increased the MCLR of only three, six and 12 months. MCLR has been maintained for periods of one day, one month, two years and three years.

42 percent loan is linked to MCLR
Bank Chairman CS Shetty said that 42 per cent of the bank's loan segment is linked to MCLR, while the rest is based on external benchmarks. He also clarified that deposit rates in the banking system are at their highest level.

What is MCLR?
If we understand in simple words, MCLR is the minimum interest rate. On which any bank or lender can give you a loan. No bank can give loan at an interest rate lower than MCLR. However, relaxation may be granted in certain cases. But, this requires RBI permission.

The objective behind implementing MCLR was to remove the shortcomings of the base rate system and to provide relief to the borrowers. This also includes home loan. Along with this, borrowers also get the benefit of interest rates reduced by RBI. MCLR was implemented by replacing the base rate system in April 2016. Its objective was to improve the effectiveness of monetary policy and make the process of setting interest rates transparent.

How will borrowers be affected?
MCLR is directly related to repo rate and cost of funds of banks. Therefore, any change in the repo rate also impacts your home loan interest rate. If a bank reduces the MCLR, your home loan interest rate also reduces. There will be no change in your EMI, but the loan tenure will definitely be affected.