HDFC Bank Raises MCLR by up to 5 basis points

The Reserve Bank of India introduced a new lending regime in October 2019, linking the interest rate on home loans to external benchmarks.

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Mumbai : In a move that is set to increase financial burdens on borrowers, HDFC Bank, India's largest private sector bank, has announced changes to its loan interest benchmark. Effective from November 7, the bank has raised its Marginal Cost of Funds Based Lending Rate (MCLR) by up to 5 basis points.

The current MCLR range at HDFC Bank is 8.65 to 9.30 percent. The overnight MCLR has increased by 5 basis points from 8.60 percent to 8.65 percent. Similarly, the one-month MCLR has seen a 5 basis point hike to 8.70 percent. The three-month MCLR has also been raised by 5 basis points, now standing at 8.90 percent, up from 8.85 percent. The six-month loan interest benchmark has been set at 9.15 percent, while the one-year MCLR is at 9.20 percent. For two and three-year tenures, the MCLR stands at 9.25 and 9.30 percent, respectively.

HDFC Bank has further revised its base rate and PLR (Prime Lending Rate) as of September 25, 2023, with the base rate currently set at 9.25 percent and the PLR at 17.85 percent.

It's important to note that banks often adjust their lending rates in response to changes in the repo rate set by the Reserve Bank of India. Banks are not permitted to offer loans at rates lower than the MCLR, and they typically add a spread over this benchmark to determine the loan interest rates. However, the final interest rate also takes into account factors such as the borrower's creditworthiness, often assessed through their CIBIL (Credit Information Bureau of India Limited) score. Lower CIBIL scores may result in higher interest rates, and in some cases, it may even impact a borrower's ability to secure a loan.

Notably, the Reserve Bank of India introduced a new lending regime in October 2019, linking the interest rate on home loans to external benchmarks. Banks were allowed to apply spreads over these external benchmarks for interest rate calculations, introducing greater transparency and fairness to the lending process.

As HDFC Bank adjusts its MCLR and other benchmark rates, borrowers should be prepared for potential increases in their loan interest costs, with their CIBIL scores playing a significant role in the final interest rate they are offered.