South Indian Bank Raises MCLR by 0.05%: What It Means for Your Floating-Rate Loan EMI

South Indian Bank has raised its MCLR by 5 basis points, according to reporting by CNBC TV18. That's a rise of 0.05 percentage points in the bank's benchmark lending rate.

If your loan is linked to MCLR, your rate may go up slightly at its next reset. The change is small, so your EMI will rise by only a few rupees for every lakh you owe.

Key takeaways

• South Indian Bank raised its MCLR by 5 bps, or 0.05%, as reported by CNBC TV18.
• Only loans linked to MCLR are affected, and only after their next reset date.
• On a ₹30 lakh, 20-year loan, the EMI rises by about ₹95 a month.
• Check your loan papers to see which benchmark you're on.

How MCLR works in simple terms

MCLR stands for marginal cost of funds based lending rate. In plain words, it's the base rate a bank uses to price its loans. A bank can't lend below this base rate, with only a few exceptions.

Banks publish MCLR for several tenures, such as overnight, one month, three months, six months and one year. Each loan is tied to one of these tenures. Your loan rate is the MCLR plus a spread, which is the bank's own margin.

When MCLR goes up, your loan rate follows. But it doesn't happen overnight. Your rate changes only on the reset date, which is often every six months or every year.

One more point matters here. Since October 2019, the RBI has asked for a new setup. New floating-rate retail loans must link to an external benchmark, such as the repo rate. So many newer loans don't use MCLR at all.

We haven't listed the new tenure-wise figures here. Please check the bank's website for the exact table.

What changes for borrowers: a worked example

Let's take a ₹30 lakh loan for 20 years. Say the rate is 9% a year. The EMI works out to about ₹26,990 a month.

Now add 0.05% to the rate, making it 9.05%. The EMI becomes about ₹27,085. That's roughly ₹95 more each month.

Over the full 20 years, that adds up to around ₹23,000 in extra interest if the rate stayed there. Remember, though, that rates reset many times over a loan's life. So the real number will differ.

Here's a rough guide to the extra EMI at different loan sizes. It assumes a 20-year loan and a 0.05% rise.

Loan amount	Approx. extra EMI per month
₹10 lakh	₹32
₹20 lakh	₹63
₹30 lakh	₹95
₹50 lakh	₹158

You can test your own numbers with our EMI calculator.

Who is affected

Not everyone with a South Indian Bank loan will feel this. It depends on how your loan is priced.

• MCLR-linked borrowers: You'll see a higher rate at your next reset date.
• Repo-linked borrowers: Your rate follows the RBI's repo rate, so this news doesn't change it.
• New borrowers: Check which benchmark your offer uses before you sign.
• Savers: MCLR is a lending rate. It doesn't directly change what your fixed deposit earns.

If you're comparing loan offers, our home loan guides and personal loan guides explain how rates and spreads differ.

What to do now

You don't need to rush. A few quick checks are enough.

1. Open your loan sanction letter and find the benchmark. It will say MCLR, repo rate or something else.
2. Note your reset date and the tenure of MCLR your loan uses.
3. Check the new rate on the bank's site before your reset date.
4. Compare your rate with other lenders on our interest rates page.
5. If you can, make a small part-payment. It cuts your principal and your future interest.

Frequently asked questions

Will my EMI go up right away after the MCLR hike?

No. Your EMI changes only on your loan's reset date. Until then, your current rate stays the same.

Does the MCLR hike affect my home loan?

Only if your home loan is linked to MCLR. Loans linked to the repo rate or another external benchmark aren't affected by this change.

Is a 5 bps rise a big deal?

No, it's a small move. It adds roughly ₹3 a month per lakh on a 20-year loan, so most budgets won't notice it.