On May 7, 2025, HDFC Bank, the largest private sector bank in India, reduced its MCLR (Marginal Cost of Funds Based Lending Rate) by 0.10% to 0.15%. This reduction will lower the EMI (Equated Monthly Installments) for home, car, and personal loans.
Following the RBI’s two cuts in the repo rate, many banks, including HDFC, have lowered their interest rates, especially on fixed deposits and MCLR.
HDFC Bank’s New MCLR Rates
The new MCLR rates, effective from May 7, 2025, are as follows:
| Period | New MCLR (7 May 2025) | Old MCLR |
|---|---|---|
| Overnight | 9.00% | 9.10% |
| One month | 9.00% | 9.10% |
| Three months | 9.05% | 9.20% |
| Six months | 9.15% | 9.30% |
| One year | 9.15% | 9.30% |
| Two years | 9.20% | 9.30% |
| Three years | 9.20% | 9.35% |
HDFC Bank has reduced MCLR across all periods, bringing the overnight and one-month MCLR to 9.00%, while the three-month rate is now 9.05%. The six-month and one-year MCLR has decreased to 9.15%, and the two and three-year rates are now at 9.20%.
Impact of MCLR Changes
Any change in the MCLR directly affects the EMI for floating-rate loans, including home, car, and personal loans. When MCLR is increased, the loan interest rates go up, and borrowers will have to pay higher EMIs.
On the other hand, a reduction in MCLR results in lower interest rates and reduced EMIs, which also benefits those looking to take out new loans at cheaper rates.
How MCLR is Determined
MCLR is influenced by several factors, such as deposit rates, repo rates, operational costs, and the cash reserve ratio (CRR).
A decrease in the RBI’s repo rate generally leads to a reduction in MCLR, making loans cheaper. Conversely, an increase in the repo rate leads to a rise in MCLR and higher loan EMIs.