HDFC Bank has raised its Marginal Cost Based Lending Rate (MCLR) by up to 15 basis points on select tenors, effective from May 8, 2023. HDFC Bank's move will impact borrowers of personal loans and vehicle loans whose loans are tied to the MCLR.
HDFC Bank MCLR Rates
According to the bank's website, the overnight MCLR has been revised to 7.95% from 7.80%, the MCLR for one month is now 8.10% from 7.95%, and the three-month and six-month MCLRs will be 8.40% and 8.80%, respectively. The one-year MCLR, which is connected to many consumer loans, will now be 9.05% from 8.95%, the two-year MCLR will be 9.10%, and the three-year MCLR will be 9.20%.
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What Is MCLR?
MCLR is the minimum interest rate that a financial institution charges for a particular loan, and it indicates the loan's lowest possible interest rate. The factors taken into account when determining the MCLR include deposit rates, repo rates, operational costs, and the cost of maintaining the cash reserve ratio.
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Before the implementation of the MCLR, the base rate served as the minimum interest rate for loans mandated by the Reserve Bank of India. However, the MCLR rate is now the basis of the interest rate for loans, and it depends on the marginal cost of funds.
HDFC Bank's increase in MCLR rates is likely to impact borrowers of personal loans and vehicle loans. However, home loan borrowers who obtain their loans through HDFC Limited, the parent company of HDFC Bank, will not be affected by this change. HDFC Bank's move also reflects the changing market conditions and the bank's effort to maintain its profitability.
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