Sidhartha | Updated: Mar 1, 2018, 17:41 IST | Time of India
NEW DELHI: Several lenders, including State Bank of India, ICICI Bank and Punjab National Bank on Thursday announced an increase in lending rates, a move that may make your home loans a little expensive.
The hikes come amid tightening liquidity or cash supply in the banking system, accentuated by the year-end rush that prompted SBI, the country’s largest lender, to raise deposit rates by up to 50 basis points for retail borrowers.
On Thursday, SBI increased its marginal cost of lending rate, which is linked to the interest rate on funds raised by a bank, by 20 basis points (8.15% from 7.95%).
Like SBI, starting March 1, ICICI Bank and PNB increased their MCLR but by a slightly lower magnitude of 15 basis points. Some lenders such as HDFC Bank will review rates next week.
Typically, while extending a home loan, banks keep a spread over the MCLR which results in a higher interest rate on these loans. PNB said that its home loans will cost 8.6% for most borrowers, while women will get it at 8.55%.
SBI has a spread of 40 basis points over the MCLR for most borrowers and 35 basis points for women borrowers (100 basis points equal a percentage point).
While the government has been seeking a lower interest rate and has repeatedly prodded the Reserve Bank of India to pare policy rates, the central bank has resisted a softer interest rate regime, arguing that there is a risk of higher inflation given the recent rise in global crude petroleum prices as well as the impact of domestic measures such as higher allowances for government employees following implementation of the seventh pay commission recommendations. Besides, it has pointed to higher food prices to refrain from cutting policy rates.
With economic growth picking up, RBI may not move that path now and last month the government’s chief economic adviser Arvind Subramanian had acknowledged that the scope to lower rates may have narrowed.