The largest lender State Bank of India on Thursday raised its lending rates by 0.20 percentage point (20 basis points) to 8.15 per cent, with immediate effect, setting the tone for the industry to follow suit.

This is the first lending revision by the bank since April 2016 and comes a day after it massively raised the retail and bulk deposit rates.

Prior to this, the one year-MCLR (marginal cost of funds based lending rate), on which most of the lending is based now, was at 7.95 per cent.

The six-month MCLR has been raised by 10 basis points to 8 per cent, while the three-year loan pricing goes up by 25 basis points to 8.35 per cent.

For the third consecutive time since November, the bank yesterday raised its retail and bulk term deposit rates for various maturities by up to 75 basis points.

For retail deposits, below Rs 10 million, the rate was increased by up to 0.50 per cent, while for deposits maturing in one year to less than two years, it was hiked by 0.15 per cent to 6.40 per cent. Punjab National Bank also raised one-year MCLR to 8.3% from 8.15% with effect from March 1.

The revised one-year MCLR comes as dampener for home loan borrowers as EMIs are likely to rise. The move could also lead to other increasing their benchmark lending rates.

The new lending rate system is applicable on all home loans, car loans, education loans and personal loans taken after April 2016. All loans sanctioned after April 1, 2016 are priced with reference to the MCLR.

The latter includes marginal cost of funds, negative carry due to CRR (cost that incur on keeping funds with the RBI as CRR), operating costs and tenure premium (costs arising from loan commitments with a longer tenor). The final lending rate charged to a customer includes spread to the MCLR.