In the midst of inflation, the era of cheap loans and EMIs is about to end. It has been started by the public sector banks of the country. Country’s largest state-run bank SBI has increased its marginal cost based lending rate (MCLR) by 10 basis points (bps) or 0.1 per cent.
This move will increase the EMI for the borrowers. Like SBI, Bank of Baroda has also increased the MCLR by 0.05 percent. Along with this, other banks are also likely to revise the lending rate in the coming days.
This increase comes at a time when there are reports of RBI increasing the repo rate in the upcoming monetary policy meeting. Recently, the economy research team of State Bank of India has said that RBI will increase the repo rate by at least 25 basis points in June. This trend is likely to continue in the August meeting as well. This means that the repo rate can be increased twice in a row.
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At present the repo rate has been kept constant at 4 per cent. For the 10th time in a row, RBI has not made any change in the repo rate. Now in the inflationary environment, RBI may consider increasing the repo rate. If this happens then banks can increase the interest rates of the loan.