HDFC Bank, the largest private sector bank in India, has made a significant change for its customers in the new year.
On January 7, 2025, the bank reduced the Marginal Cost of Funds Based Lending Rate (MCLR) by 0.05% on certain loan tenures.
This change applies to overnight, six-month, one-year, and three-year periods. While these tenures have seen a rate reduction, other MCLR periods remain unchanged.
New MCLR Rates Effective from January 7, 2025
Overnight MCLR: Reduced to 9.15% from 9.20% (a 0.05% reduction).
One-month MCLR: Remains at 9.20% (no change).
Three-month MCLR: Remains at 9.30% (no change).
Six-month MCLR: Reduced to 9.40% from 9.45% (a 0.05% reduction).
One-year MCLR: Reduced to 9.40% from 9.45% (a 0.05% reduction).
Tenure Above 2 Years: Remains at 9.45% (no change).
Tenure Above 3 Years: Reduced to 9.45% from 9.50% (a 0.05% reduction).
How MCLR Changes Affect Your Loans
The MCLR reduction can impact your monthly loan EMI, especially for those with floating interest loans, including home loans, car loans, and personal loans.
When MCLR decreases, the interest rate on loans also reduces, which can lead to lower EMIs for both new and existing loan customers.
For example, if you are planning to take out a loan for a car or house, it may now cost you less compared to before. Additionally, borrowers with existing loans could see a small reduction in their monthly EMI payments.
What Decides the MCLR Rate?
The MCLR is influenced by several factors, including the deposit rate, repo rate, operational costs, and the cost of maintaining the cash reserve ratio.
Changes in the Reserve Bank of India’s repo rate can also impact the MCLR, which directly affects loan interest rates and EMIs.
A rise in MCLR leads to an increase in loan EMIs, while a decrease leads to a reduction in EMIs for floating rate loan holders.