If you have a loan from HDFC Bank, there is important news for you.
India’s largest private sector bank has increased its Marginal Cost of Funds Based Lending Rate (MCLR), a move that could make certain loans more expensive.
The revised rates came into effect on June 8 and may lead to higher EMIs for customers whose loans are linked to MCLR.
The decision comes even though the Reserve Bank of India (RBI) recently kept the repo rate unchanged.
HDFC Bank Raises MCLR Across Multiple Tenures
According to the bank’s latest update, MCLR rates have been increased by 5 to 10 basis points across different loan tenures.
Here are the revised rates:
Overnight MCLR: Increased from 8.05% to 8.10%
Three-month MCLR: Increased to 8.20%
Six-month MCLR: Increased to 8.35%
One-year MCLR: Increased to 8.40%
Two-year MCLR: Increased to 8.55%
Three-year MCLR: Increased to 8.65%
The one-year MCLR is particularly important because many home loans are linked to this benchmark rate.
What Does This Mean for Borrowers?
Customers with MCLR-linked floating-rate loans may see an increase in their borrowing costs.
When the MCLR rises, the interest rate on linked loans can also increase.
As a result, borrowers may have to pay higher EMIs or continue repaying their loans for a longer period, depending on the terms of their loan agreement.
This change could affect:
Home loan borrowers
Personal loan customers
Business loan borrowers
Other customers with MCLR-linked floating-rate loans
However, customers whose loans are linked to other benchmarks may not be directly impacted.
Why Is the One-Year MCLR Important?
The one-year MCLR serves as the benchmark for many home loans.
Since HDFC Bank has increased this rate by 5 basis points to 8.40%, some home loan borrowers could see a rise in their monthly repayment burden when their loan interest rates are reset.
The exact impact will depend on the outstanding loan amount, tenure, and reset date specified in the loan agreement.
What Is MCLR?
MCLR stands for Marginal Cost of Funds Based Lending Rate.
It is the minimum interest rate at which a bank can lend money to its customers.
Banks use this benchmark to determine the interest rates charged on various loans.
Several factors influence MCLR, including:
Deposit rates
RBI’s repo rate
Operational costs
Cost of maintaining cash reserve requirements
When these factors change, banks may revise their MCLR accordingly.
Why Did HDFC Bank Increase Rates?
Interestingly, the move comes shortly after the RBI kept the repo rate unchanged at 5.25%.
Even so, banks can adjust their MCLR based on their own funding costs and business requirements.
HDFC Bank’s decision suggests that its cost of funds and lending strategy may have influenced the rate revision.
Key Takeaway
HDFC Bank’s latest MCLR hike means that some borrowers may soon face higher loan costs.
Customers with MCLR-linked floating-rate loans, especially home loans, should review their loan terms and keep an eye on future EMI changes.
While the increase is relatively small, even a slight rise in interest rates can affect monthly payments over the long term.
