HDFC Bank raises MCLR by 5 bps for select tenures, effective October 7

HDFC Bank has raised its marginal cost of funds based lending rate (MCLR) by 5 basis points (bps) on select tenures, effective October 7. Consequently, HDFC Bank’s MCLR now ranges from 9.10 per cent to 9.50 per cent, according to its website.

The bank has raised the MCLR in two tenures – six months and three years. Now, the six-month MCLR for the bank stands at 9.45 per cent, and the three-year MCLR stands at 9.50 per cent. MCLR for other tenures remains unchanged.

MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan.

Banks have been raising deposit rates for quite some time to mobilise more liabilities amid sluggish deposit growth. Meanwhile, the external benchmark-linked loan rates have remained the same as the apex rate-setting panel, the monetary policy committee (MPC) of the Reserve Bank of India (RBI), has kept the policy rates unchanged for nine consecutive meetings. However, banks have been gradually increasing their MCLRs over time. Mostly, corporate loans are benchmarked to the MCLR, while retail loans are tied to external benchmarks.

Interestingly, a Business Standard poll of ten economists indicated that the MPC is set to keep the rates unchanged yet again during its meeting from October 7 to 9. The policy rate, or repo rate, currently stands at 6.50 per cent.