State Bank of India (SBI) has announced a 10 basis point (bps) hike in the marginal cost of fund-based lending rate (MCLR) across the tenor. The new rates will come into effect from February 15. MCLR is the lowest rate at which a bank can lend money to its customers.

The Reserve Bank of India (RBI) established MCLR in 2016 to determine lending rates for various loans. It usually follows the same trajectory as the RBI Monetary Policy Committee (MPC).

The increase in SBI’s MCLR comes a few days after the Reserve Bank of India’s MPC announced on February 8 that it would hike the repo rate by 25 basis points to 6.5%.

“The MPC believes that further adjustments to monetary policy actions are necessary to keep inflation expectations stable, break the persistence of core inflation and strengthen medium-term growth prospects. Accordingly, the MPC decided to raise the policy repo rate by 25 basis points to 6.50″ The Monetary Policy Committee will remain vigilant on the changing inflation outlook to ensure that it remains within tolerance and is gradually aligned with the target,” RBI Governor Shatktikanta Das said in a statement.

Despite a cumulative rate hike of 250 basis points, inflation has exceeded the Reserve Bank of India’s tolerance ceiling of 6%. India’s retail inflation rose to 6.52% in January. It was 5.72% in December. Wholesale inflation, however, has fallen to a two-year low of 4.73%.

Many banks, including Bank of Baroda, Bank of India and Punjab National Bank, also hiked their key lending rates after the repo rate hike. SBI is the latest to join the list.

The overnight MCLR rate has been raised by 10 basis points to 7.95%, according to the SBI website. 10 basis points boost the one-month MCLR from 8% to 8.10%.

The three-month MCLR has improved to 8.1% from 8% in January. The six-month MCLR is now 8.4%, compared to 8.3%.

The new rate has been raised to 8.5% for one-year terms from the previous 8.4%.

For two-year terms, MCLR has been raised from 8.5% to 8.6%, while for three-year terms, it has been raised from 8.6% to 8.7%.