EMIs to reduce as HDFC Bank cuts MCLR rates by 5 bps on select loans

Lender's decision will help customers who have floating rate loans linked to the one-year MCLR

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HDFC Bank has reduced lending rates for select loan tenures, giving relief to customers whose loans are linked to the Marginal Cost of Funds-based Lending Rate (MCLR). The cuts of up to five basis points (bps) are marginal but important in the current high-interest rate environment. One basis point equals one-hundredth of a percentage point.

 

HDFC new lending rates

 

The bank’s MCLR is now at 8.55 per cent to 8.75 per cent, depending on tenure. Here’s the new structure:

 

• Overnight and one-month MCLR: 8.55 per cent (unchanged) 
• Three-month MCLR: 8.60 per cent (unchanged) 
• Six-month MCLR: 8.65 per cent (down from 8.70 per cent) 
• One-year MCLR: 8.65 per cent (down from 8.70 per cent) 
• Two-year MCLR: 8.70 per cent (down from 8.75 per cent) 
• Three-year MCLR: 8.75 per cent (unchanged)

 

For borrowers, particularly those with floating rate loans linked to the one-year MCLR, the reduction translates into slightly lower EMIs.

 

What is MCLR

 

It is the minimum lending rate below which a bank cannot lend, except in special cases. It was introduced by the Reserve Bank of India in 2016 to bring more transparency to loan pricing. When banks adjust their MCLR, borrowers with loans linked to this benchmark see a change in their EMIs, depending on the reset period of their loan.

 

Home loan interest rates remain repo-linked

 

HDFC Bank’s home loans are linked not to MCLR but to the Reserve Bank’s repo rate. According to the bank’s website, rates for salaried and self-employed borrowers currently range from 7.90 per cent to 13.20 per cent. These are calculated as the repo rate plus a spread that varies depending on borrower profile and loan amount.

 

Other benchmark rates unchanged

 

The bank has kept its base rate steady at 9.35 per cent and its Benchmark Prime Lending Rate at 17.85 per cent per annum. These rates are relevant for certain older loan accounts still linked to them.

 

What it means for depositors

 

On the deposit side, HDFC Bank offers fixed deposit (FD) rates of 2.75 per cent–6.60 per cent for general customers and 3.25 per cent–7.10 per cent for senior citizens, on amounts below Rs 3 crore. The highest returns are on FDs of 18 to less than 21 months, where the rates peak at 6.60 per cent and 7.10 per cent, respectively.

 

For borrowers, the MCLR cut means marginally lower interest costs on loans tied to this benchmark. While the relief may not be significant, every reduction counts at a time when household budgets are under pressure from high EMIs.