HDFC Bank cuts MCLR by up to 85 bps; Select EMIs to go down

HDFC bank has slashed the marginal cost of funds-based lending rate (MCLR) by upto 85 basis points for loans of short tenures. This indicates, that the interest rates may have peaked at the shorter end.

The MCLR cut is by 85 bps to 7.80% and the one-month tenure rate has been reduced by 70 bps to 7.95%. Meanwhile, 3-month loans was slashed by 40 bps to 8.30% and 6-month loans by 10 bps to 8.70%. However, rates of long-term loans were left unchanged. 1-year, 2-year, 3-year tenors will continue to be disbursed at 8.95%, 9.05% and 9.15%, respectively. The new rates will be effective from April 10, 2023.

MCLR is the minimum interest rate that can be charged for a loan. 

As per Financial Express, HDFC Bank had last increased its MCLR in March by 5 bps across loan tenures to between 8.65%-9.15% per annum. This move, has come after RBI kept the repo rate unchanged. Some experts also believe that RBI will go for a rate cut later this year.

This MCLR reductio will not have any effect on the HDFC bank's home loan borrowers because most of the home loans are sourced through their parent concern HDFC Limited. Only old personal loans and auto loans that are linked to the MCLR rate will get the relief

Despite RBI's pause to raise interest rate, certain private lenders like the Bank of Baroda increased the MCLR for loans of a tenor of one year by 5 bps to 8.60%. Canara Bank has also hiked the rates on six-month and one-year tenors by 5 bps each to 8.45% and 8.65%, respectively.