Canara Bank has announced a small change in its lending rates. The bank informed the stock exchanges that it has revised its Marginal Cost of Funds Based Lending Rate (MCLR).
The new rates are effective from February 12, 2026.
MCLR is the minimum interest rate below which a bank cannot lend money. It was introduced by the Reserve Bank of India (RBI) to make sure that changes in policy rates are passed on to customers quickly and transparently.
This system helps borrowers benefit when interest rates fall and also ensures clarity in how banks decide lending rates.
Short-Term MCLR Rates Cut
Canara Bank has reduced only its short-term MCLR rates. The medium- and long-term rates remain unchanged.
Overnight MCLR has been reduced from 7.90% to 7.85%, a cut of 5 basis points (bps).
One-month MCLR has also been reduced from 7.95% to 7.90%, again a 5 bps cut.
A basis point is one-hundredth of a percentage point. This means 5 basis points = 0.05%.
The following MCLR rates remain unchanged:
Three-month MCLR: 8.15%
Six-month MCLR: 8.50%
One-year MCLR: 8.70%
Two-year MCLR: 8.85%
Three-year MCLR: 8.90%
This shows that the bank has provided relief only in the very short-term lending segment while keeping medium- and long-term rates stable.
Why This Revision Is Important
Many loans are linked to a bank’s MCLR. These include:
Home loans
Car loans
Personal loans
Business loans
Borrowers whose loans are linked to the overnight or one-month MCLR — especially those with shorter reset periods — may see a small reduction in their interest costs.
New borrowers choosing short-term linked loan products may also benefit slightly from the lower rates.
Although the cut is small at just 5 basis points (0.05%), even minor changes can reduce the total interest amount over time, especially for large loans like home loans.
A small rate cut on a high-value loan can lower the total interest payable during the loan tenure.
Impact on Existing Borrowers
Existing customers will benefit based on the reset clause in their loan agreement. Most MCLR-linked loans have reset periods such as annually or semi-annually.
If a loan is linked to a shorter MCLR tenor and its reset date is near, the borrower may see the benefit sooner.
Customers should check:
Which MCLR tenor their loan is linked to
The reset frequency
The spread charged over MCLR
If the loan is linked to the overnight or one-month MCLR with a short reset period, the lower rate will apply faster.
Market Context and RBI’s Objective
This decision comes at a time when credit demand remains strong in both retail and wholesale segments. Borrowing activity continues in housing, vehicle, and business loans.
The RBI has repeatedly said that interest rate changes should be passed on quickly to borrowers. By cutting short-term MCLR, Canara Bank is supporting this objective and improving rate transmission in the banking system.
However, the bank has not changed long-term MCLR rates. This suggests that its longer-term funding costs or overall funding conditions have not changed much.
Banks usually adjust long-term rates only when there is a lasting change in funding costs or policy outlook.
Transparent Disclosure to Stock Exchanges
Canara Bank has officially informed the stock exchanges about this revision. Such disclosures ensure transparency for investors and customers and provide clarity about the bank’s lending policies.
Overall, even though the rate cut is small, it is positive news for borrowers, especially those with short-term linked loans. Customers planning to take a loan from Canara Bank may benefit slightly, depending on their loan structure.
