HDFC Bank raised marginal cost-based lending rate (MCLR) by up to 15 basis points on select tenors. The new rates came into effect on May 8, 2023.
The increase will increase the EMIs of borrowers who have taken personal and vehicle loans that are linked to the MCLR.
The one-year MCLR — the key criterion for most loans — has been raised to 9.05 percent from the earlier 8.95%, reveals the bank’s website.
The overnight MCLR has been raised from 7.8 percent to 7.95 percent. while the one-month MCLR rose from 7.95 percent to 8.10 percent. Likewise, 3-month and six-month MCLR have now become 8.4 percent and 8.8 percent.
The two-year MCLR will now be 9.10 percent and 3-year MCLR will be 9.20 percent. In the month of Feb, SBI had raised its MCLR by 10 basis points.
What is MCLR?
MCLR stands for Marginal Cost of Funds based Lending Rate. It is the minimum lending rate below which a bank is not allowed to give a loan.
This system replaced the previous system of base rate to determine the lending rates for commercial banks.
The banking regulator Reserve Bank of India (RBI) implemented MCLR on April 1, 2016 to determine rates of interest for loans.
Banks price their loans primarily on two metrics now: the external benchmark linked to the repo rate or the open market rate of Mibor and the MCLR or the marginal cost of funds-based lending rate, with all the new loans being priced in the repo-linked rate or the external benchmark lending rate (EBLR).
The central bank has been pushing banks to become more transparent in their loan pricing since the middle of the last decade.
And since then, the loan pricing mechanism has undergone radical changes—from the highly opaque base rate to MCLR and now to the EBLR.