South Indian Bank (SIB) has made a major change in the Marginal Cost of Funds Based Lending Rate (MCLR), which is one of the basic criteria for determining the interest rate of loans. The bank has clarified that the revised rates will come into effect tomorrow (August 20).
The bank has sharply reduced the MCLR for overnight loans to 7.90 per cent from the current 9.75 per cent. One-month maturity has been reduced from 9.75 percent to 8.55 percent. This is a huge relief for those who rely on these loans.
Rates for other tenures
The MCLR for three-month loans has been increased from 9.80 to 9.85 percent. The six-month maturity has increased from 9.85 percent to 9.90 percent and the one-year maturity has increased from 9.95 to 10 percent. As per these reforms, there will be a change in the interest rates of MCLR based loans from tomorrow. That means the repayment amount (EMI) of your MCLR applicable loans with South Indian Bank like gold loan, overdraft, GST business loan will change.
What is MCLR?
MCLR is one of the basic benchmarks for determining interest rates on loans disbursed by banks. The regulation does not allow banks to offer loans at lower rates. In 2016, the Reserve Bank introduced the MCLR based on the repo rate.
MCLR will also change in proportion to change in repo. MCLR is determined by considering the bank’s operating cost, loan tenure, capital reserve ratio (CRR) etc. This will vary from bank to bank.
