Karur Vysya Bank has announced a reduction in its External Benchmark Lending Rate (EBLR) from 10.05% to 9.9%, effective August 19.

EBLR, which is a key interest rate used to determine the cost of loans, is set independently by banks, not by the Reserve Bank of India (RBI). This reduction could potentially lower the interest on loans linked to this rate, but it is important to note that not all loans are tied to EBLR. Some loans may still be subject to other rates like the Marginal Cost of Funds Based Lending Rate (MCLR), which may not see a decrease.

In contrast, the State Bank of India (SBI), the largest government bank in the country, has increased its MCLR by 0.10 percentage points (10 basis points) starting August 15. This move follows the RBI’s decision to keep the repo rate steady at 6.5%.

SBI’s MCLR hike marks the third consecutive month of increases, with the bank having raised rates by up to 30 basis points in some tenures since June 2024.

These changes reflect differing approaches by banks in response to market conditions and the RBI’s monetary policy. While Karur Vysya Bank’s cut in EBLR may offer some relief to borrowers, SBI’s MCLR hike could increase borrowing costs for those with loans linked to this rate.