HDFC Bank customers may have to pay more on their loans.
The country’s largest private sector bank has increased its Marginal Cost of Funds Based Lending Rate (MCLR), a move that could lead to higher EMIs for many borrowers.
The revised rates came into effect on June 8 and will impact loans linked to MCLR, including several home loans and other floating-rate loans.
HDFC Bank Raises MCLR Across Multiple Tenures
According to the bank’s updated rates, MCLR has been increased by 5 to 10 basis points across different loan tenures.
Here are the new rates:
Overnight MCLR: Increased from 8.05% to 8.10%
Three-month MCLR: Increased to 8.20%
Six-month MCLR: Increased to 8.35%
One-year MCLR: Increased to 8.40%
Two-year MCLR: Increased to 8.55%
Three-year MCLR: Increased to 8.65%
The one-year MCLR is particularly important because many home loans are linked to this benchmark.
What Does This Mean for Borrowers?
If your loan is linked to MCLR, your borrowing cost may increase when the interest rate is reset.
This means:
Monthly EMIs could go up
The total interest paid over the loan period may increase
Existing borrowers may see higher repayment obligations after their next reset date
New customers taking MCLR-linked loans could also end up paying higher interest rates compared to earlier borrowers.
Why Is This Significant?
The decision comes just days after the Reserve Bank of India (RBI) announced its latest monetary policy and kept the repo rate unchanged at 5.25%.
Despite no change in the repo rate, HDFC Bank has decided to increase its lending benchmark, making loans slightly more expensive for certain customers.
As a result, borrowers who were expecting stable loan costs may now face a higher EMI burden.
Who Will Be Affected the Most?
The impact will mainly be felt by customers who have:
MCLR-linked home loans
Floating-rate personal loans
Floating-rate business loans
Other loans tied directly to MCLR
Borrowers with fixed-rate loans will not be affected by this change.
The increase will generally take effect when the loan reaches its next interest rate reset period.
What Is MCLR?
MCLR, or Marginal Cost of Funds Based Lending Rate, is the minimum interest rate at which banks can lend money to customers.
Banks use several factors to calculate MCLR, including:
Cost of deposits
RBI repo rate
Operating expenses
Cash Reserve Ratio (CRR) maintenance costs
Changes in these factors can lead banks to revise their lending rates from time to time.
Bottom Line
HDFC Bank’s latest MCLR hike means loans linked to this benchmark may become more expensive.
While the increase is relatively small, it could still result in higher EMIs for many borrowers, especially those with home loans.
Customers with MCLR-linked loans should check their loan terms and upcoming reset dates to understand how the revised rates may affect their monthly repayments.
