HDFC Bank: HDFC Bank has delivered a jolt to its customers by hiking its 3-year MCLR by 5 basis points. However, the rates for the 1-year and 2-year MCLRs have been kept unchanged.
HDFC Bank Alert: HDFC Bank, the country's largest private-sector lender, has delivered a significant shock to its customers. Specifically, the bank has implemented a mixed revision in its interest rates (MCLR). Consequently, while the EMIs for some customers will increase, those for others may actually decrease. The bank has raised its 3-year Marginal Cost of Funds Based Lending Rate (MCLR) by 5 basis points (0.05%).
This means that if your home loan—or any long-term credit you have availed—is linked to the MCLR, your expenditure on loan EMIs could rise in the near future. Following the 5-basis-point hike in the bank's 3-year MCLR, the rate has now risen from 8.55% to 8.60%.
Changes in MCLR Rates
| Loan Tenure | Old MCLR rate | New MCLR rate | shift |
| overnight or a month | 8.10% | 8.05% | 0.05% (cheap) |
| 3 months | 8.20% | 8.15% | 0.05% (cheap) |
| 6 months | 8.35% | 8.30% | 0.05% (cheap) |
| 1 year-2 years | 8.35% / 8.45% | steady | no changes |
| 3 year | 8.55% | 8.60: | 0.05% (expensive) |
Who Will Remain Unaffected?
The bank has kept the rates for the 1-year and 2-year MCLRs steady at 8.35% and 8.45%, respectively. This implies that if your home loan is linked to the 1-year MCLR, there will be no change in your EMI, as the 1-year rate remains constant at 8.35%.
If you have taken a loan for a longer tenure—up to 3 years—the interest rates may now become more expensive, based on the revised 8.60% MCLR. Meanwhile, for new customers, personal loan interest rates are starting at 10.9%. If your loan is on a fixed interest rate basis, these changes implemented by the bank will have no impact on your EMI.
What is MCLR?
MCLR (Marginal Cost of Funds Based Lending Rate) is the minimum interest rate below which a bank cannot offer you a loan. When a bank increases or decreases its MCLR, the interest rate on your loan also fluctuates in the same proportion. The Reserve Bank of India (RBI) introduced this mechanism in 2016 with the objective of enhancing transparency and ensuring that customers benefit from changes in interest rates.
The MCLR is determined based on the bank's cost of funds. Previously, banks used to set interest rates at their own discretion; however, following the introduction of the MCLR, they now base their decisions on their cost structure. Since October 2019, new loans have been linked to the EBLR (External Benchmark Lending Rate), which is directly tied to the Repo Rate.
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