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SBI raises MCLR amid Rising CPI and WPI

Published on April 20, 2022
Current Context: The largest commercial bank SBI, has increased its MCLR to 10 bps to arrest inflationary pressure.
SBI raises MCLR amid Rising CPI and WPI
  • What is MCLR?
    • The marginal cost of the Lending rate is the benchmark rate, below which a scheduled Commercial Bank is not allowed to lend. RBI introduced this measure w.e.f 1st April 2016.
    • MCLR-linked loans had the largest share of 53.1 % of the loan portfolio of the Banks as of December 2021. FBIL is a private entity that ensures the transmission of policy rates from the Central Bank to the Scheduled Commercial Banks.
  • Repercussions of increase in MCLR
    • Equated Monthly Installment (EMI) will go up
    • Interest rate of the Bank will rise
  • Why the rise in MCLR?
  1. The Consumer Price Index (c) has shot up to 6.95%, breaching the RBI’s mandated threshold.
  2. The Wholesale Price Index has gone up to 14.55%, registering inflation at a skyrocketing level.
  3. Therefore SBI has resorted to a contractionary Monetary Policy by raising MCLR.
  4. From 7% to 7.10%. It would amount to a raised interest rate, thus being able to contain inflation.


Q.1 What is the new MCLR proposed by the State Bank of India?
a. 7.0%
b. 7.10%
c. 6.0%
d. 7.25%

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