MCLR cuts by HDFC Bank, PNB, BoB hint at possible EMI relief this month

HDFC Bank, PNB, BoB, IOB and BOI trim MCLR rates, signalling possible EMI relief for borrowers soon

Several major lenders have trimmed their Marginal Cost of Funds-based Lending Rates (MCLR) this month, raising hopes of lower home and personal loan EMIs for borrowers.

 

What is MCLR and why does it matter

 

MCLR is the benchmark rate that banks use to price floating-rate loans taken before October 2019. Any reduction in MCLR may lower EMIs or shorten repayment tenures for borrowers still linked to this system. Most new loans today are pegged to the External Benchmark Lending Rate (EBLR), which moves with the RBI repo rate. However, banks allow customers to switch from MCLR to EBLR by paying a conversion fee.

 

 

HDFC Bank and PNB lead the cuts

HDFC Bank reduced its six-month and one-year MCLR by 5 basis points (bps) each to 8.65 per cent, while its two-year rate now stands at 8.70 per cent. Overnight and three-year MCLR remain unchanged at 8.55 per cent and 8.75 per cent, respectively.

 

PNB cut its rates by 5-15 bps across most tenures. Its one-year MCLR — the benchmark for most retail loans — is now at 8.80 per cent.

 

 

Bank of Baroda, IOB and BOI follow

Bank of Baroda: Overnight MCLR down 10 bps to 7.85 per cent, three-month rate trimmed 15 bps to 8.20 per cent; longer-tenure rates unchanged.

 

Indian Overseas Bank: Cut its one-year, two-year, and three-year MCLR by 5 bps each, with the one-year now at 8.85 per cent.

 

Bank of India: Reduced rates across most tenures by 5-15 bps, with its three-year MCLR down to 9.00 per cent.

 

 

What borrowers should do

 

Borrowers on MCLR-linked loans may see a reduction in EMIs from their next reset date. Those with older loans may consider moving to EBLR-linked loans for faster transmission of future rate cuts, but should compare the conversion cost before switching.

 

With inflation easing and lending rates beginning to soften, September may bring the first signs of relief for household budgets strained by high EMIs over the past year.