After the Reserve Bank of India lowered the repo rate, several banks have also started reducing their loan interest rates.
Ahead of Holi, HDFC Bank, the country’s largest private sector bank, has given a benefit to its customers by cutting the Marginal Cost of Funds-based Lending Rate (MCLR) by 0.05% for a two-year period.
MCLR plays a key role in determining interest rates for home, car, and personal loans.
HDFC Bank cuts MCLR
HDFC, the country’s largest private sector bank, has given relief to its customers ahead of Holi by reducing the MCLR by 0.05 percent on select tenure loans.
This reduction applies specifically to loans with a 2-year tenure, while the MCLR for other tenures remains unchanged. The revised MCLR rate has been in effect since March 7, 2025.
HDFC Bank’s New MCLR Rates – Effective from March 7, 2025
- Overnight MCLR: 9.20% (No change)
- One-month MCLR: 9.20% (No change)
- Three-month MCLR: 9.30% (No change)
- Six-month MCLR: 9.40% (No change)
- One-year MCLR: 9.40% (No change)
- Two-year MCLR: Reduced from 9.45% to 9.40%
- MCLR for tenures above three years: 9.45% (No change)
Impact of MCLR Changes
When banks adjust their MCLR (Marginal Cost of Funds Based Lending Rate), it directly impacts the EMIs of floating rate loans such as home loans, personal loans, and car loans.
A rise in MCLR leads to higher loan interest rates, making EMIs costlier. Conversely, a decrease in MCLR lowers interest rates, reducing EMI expenses.
This change also benefits new borrowers, as they can avail loans at more affordable rates.
How is MCLR Determined?
Banks calculate MCLR (Marginal Cost of Funds Based Lending Rate) based on several factors, including deposit rates, the repo rate, operational costs, and the cash reserve ratio (CRR).
Any change in the repo rate by the RBI directly impacts MCLR. If the repo rate goes down, banks may lower MCLR, making loans more affordable.
Conversely, if the repo rate rises, MCLR also increases, leading to higher loan EMIs.
