Mumbai: India’s largest private sector bank, HDFC Bank, has increased its Marginal Cost of Funds-Based Lending Rate (MCLR), making certain loans more expensive for customers.
According to the bank’s updated rate schedule, the revised MCLR rates came into effect on June 8. The increase ranges between 5 and 10 basis points across different loan tenures.
New MCLR Rates Effective From June 8
The overnight MCLR has been raised from 8.05 percent to 8.10 percent.
For other tenures, the revised rates are:
Three-month MCLR: 8.20 percent
Six-month MCLR: 8.35 percent
One-year MCLR: 8.40 percent
Two-year MCLR: 8.55 percent
Three-year MCLR: 8.65 percent
Most home loans are linked to the one-year MCLR benchmark. Therefore, borrowers with MCLR-linked home loans may see a rise in their interest costs and monthly EMIs.
Existing Borrowers Likely To Feel The Impact
The rate revision mainly affects customers who have floating-rate loans linked to MCLR.
When the MCLR increases, the interest rate charged on loans also rises. This leads to higher monthly EMI payments. On the other hand, when MCLR falls, borrowers benefit from lower interest rates and reduced EMIs.
Both existing borrowers and new customers taking MCLR-linked loans may be impacted by the latest increase.
Hike Comes Despite Stable RBI Repo Rate
The move is notable because it comes shortly after the Reserve Bank of India kept the repo rate unchanged at 5.25 percent in its latest monetary policy announcement.
Even though the benchmark policy rate remained stable, HDFC Bank chose to increase its lending benchmark, making borrowing slightly more expensive for customers.
What Is MCLR?
MCLR, or Marginal Cost of Funds-Based Lending Rate, is the minimum interest rate at which a bank can offer loans to customers.
Banks calculate MCLR using several factors, including deposit rates, the RBI’s repo rate, operating costs, and the cost of maintaining the Cash Reserve Ratio (CRR).
Changes in these factors often influence lending rates and ultimately affect the borrowing cost for customers.
