SBI raises prime lending rate, base rate by 70 bps from today

State Bank of India (SBI) has increased its benchmark prime lending rate (BPLR) by 70 basis points to 14.85% and base rate by 70 bps to 10.10% effective Wednesday, as per information on the bank website. The bank changes these rates in a quarterly cycle.

The new BPLR is the highest since September 6, 1996, when it hit 15.50% whereas base rates at 10.10% are the highest ever that the bank has charged, as per the bank’s website.

The bank has, however, left its marginal cost of funds-based lending rate unchanged across all tenures. It had previously raised its MCLR last month by 10 basis points across tenures with overnight MCLR now standing at 7.95%, 1-year MCLR at 8.50% and three-year MCLR at 8.70%.

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Analysts say the base rate and BPLR touching record high may not be of significant concern for borrowers as maximum number of borrowers have their loans already linked to the external benchmark linked rate (EBLR) or MCLR.

In SBI’s case, chairman Dinesh Khara had said in November last year that 74% of the bank’s total home loans are linked to the MCLR and EBLR. About 21% of the loans are fixed rate and the rest of the loans are still attached to BPLR (4%), he said.  SBI’s gross advances rose 17.6% on year to `31.33 lakh crore as of December end.

In the next fiscal, analysts expect banks to further raise their MCLR by up to 150 basis points on account of a sharp rise in lenders’ cost of funding.

“The drawdown from the reverse repo in FY23 to the tune of `5 trillion has enabled banks to address a surge in the gap between incremental credit and deposit, and this will not be available in FY24. Therefore, MCLR will show a significant rise,” India Ratings & Research said in a report on Tuesday.

As per latest RBI data, the weighted average lending rate (WALR) on banks’ fresh rupee loans increased 12 bps month-on-month to 9% in January, while WALR on outstanding rupee loans increased by 6 bps m-o-m to 9.58%. Meanwhile, the 1-year median MCLR of banks increased from 8.35% in January to 8.45% in February.

“…incremental funding by banks in FY24 would have to be done by way of fresh deposits, therefore the marginal cost of funding will go up significantly. Overall, deposit rates in the banking system have shot up by 150 to 200bp in the last one year, which has resulted a 75bp increase in aggregate deposits in the system,” the agency said.