SBI Keeps MCLR Rate Unchanged After RBI Pauses Repo Rate Hike

Recently, the Reserve Bank of India, or RBI, surprised economists and financial analysts by leaving the repo rate unchanged at 6.50% after six successive hikes since May. As per reports, the RBI also signalled that they have paused hiking the repo rate since they have the option to hike rates in the future if the necessity arises. As per a Reuters poll, many economists now predict that the RBI will keep the repo rate unchanged at least till the end of the fiscal as it evaluates the result of the previous rate hikes on economic growth and inflation.

The survey shows that only about one-sixth of the economists predict a 25 basis point hike to 6.75% by the end of the year. This suggests that the current tightening cycle, which started in May 2022, is likely to be over. The median view from the poll shows that by the last quarter of the fiscal 2023-24, the repo rate will remain unchanged at 6.50%. However, there is a difference in opinion among economists between no change and a 25 basis point reduction. 

As the RBI changes the repo rate, it also affects the MCLR rates of banks that borrow from the RBI. As the RBI rate goes up or down, Indian banks also change their MCLR rates. The Marginal Cost of Funds-based Lending Rate, or MCLR, is the minimum interest rate below which a bank cannot loan money to its customers. This rate is determined by taking into account the bank's marginal cost of funds, which includes the cost of deposits and other sources of funds. MCLR rates are revised regularly and vary depending on factors such as prevalent repo rate, liquidity conditions, and credit demand. 

The State Bank of India, one of the largest public sector banks in India, recently updated their MCLR rates soon after RBI announced the pause in the repo rate hike. As per the update on the SBI website, the MCLR rates, which are applicable from April 15, 2023, have also remained unchanged compared to the previous rates. You can take a look at the table below: 

Also Read: Repo Rate Remains Unchanged At 6.50%. Here’s A Look At The Repo Rate Hikes By The RBI In The Last Three Years