BoB, IOB slash MCLR: What it means for your home and personal loan EMIs

BoB and IOB have cut MCLR rates for select tenors, offering EMI relief to borrowers, effective mid-September

Borrowers with loans linked to the Marginal Cost of Funds-based Lending Rate (MCLR) at Bank of Baroda (BoB) and Indian Overseas Bank (IOB) are set to see slightly lower EMIs, thanks to a fresh rate cut. IDBI Bank, too, has announced its updated MCLR rates for September, offering a clearer picture to borrowers on what to expect at their next reset date.

 

What is MCLR and why does it matter?

MCLR is the minimum interest rate a bank can charge for floating-rate loans such as home, personal, and car loans sanctioned before October 2019. A cut in MCLR typically means lower EMIs or shorter loan tenure, but the benefit only reflects after the loan’s reset period, usually every three or six months.

 

BoB: Overnight, 3-month loans get cheaper

BoB has trimmed its overnight MCLR by 10 basis points (bps) to 7.85per cent from 7.95per cent, while the three-month MCLR has been reduced by 15 bps to 8.20per cent. Rates for one-month, six-month, and one-year tenors remain unchanged.

• Overnight MCLR: 7.85per cent (down from 7.95per cent) 
• Three-month MCLR: 8.20per cent (down from 8.35per cent)

 

 

Borrowers with short-reset personal or working capital loans will see quicker EMI relief.

Indian Overseas Bank: Cuts across longer tenors

IOB has lowered its overnight and longer-tenor MCLR by 5 bps, effective September 15.

• Overnight: 8.00per cent (from 8.05per cent)
• One-year: 8.85per cent (from 8.90per cent)
• Two-year: 8.85per cent (from 8.90per cent)
• Three-year: 8.90per cent (from 8.95per cent)

 

This will benefit retail borrowers with home or education loans linked to one-year or longer reset cycles.

What should borrowers do?

Borrowers should check their loan agreement to see when their next reset date falls. If the reset is due soon, the EMI reduction could provide some relief. Those still on MCLR may also explore switching to external benchmark-linked loans (EBLR), which tend to transmit rate changes faster.