Hike in Marginal Cost of Funds-Based Lending Rate and its Impact

Recently, State Bank of India has raised the marginal cost of funds-based lending rates (MCLR) for the first time in three years.

  • Other banks like Bank of Baroda, Axis Bank, and Kotak Mahindra Bank made 5 basis points hike in the benchmark lending rates.

Reason for Hike

  • The increase in MCLR was done after the RBI’s monetary policy committee or MPC replacing the reverse repo with SDF or the standing deposit facility as the floor rate for liquidity adjustment facility.
  • In effect, it incentivises banks to park more money with the RBI as SDF can earn 3.75 per cent interest as against ....
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