HDFC Bank increases MCLR rates; auto loan EMIs, personal loan EMIs to go up

HDFC Bank loan rates:  HDFC Bank has increased its Marginal Cost Based Lending Rate (MCLR) by 5-15 basis points on select tenors. According to HDFC Bank’s website, the new loan interest rates are effective from May 8, 2023. 

The MCLR is the minimum lending rate below which a bank is not permitted to lend. 

The latest hike in MCLR rates by HDFC Bank will impact floating rate borrowers of personal loans and vehicle loans, which fluctuate with the change in the MCLR. 

After the latest hike, the HDFC Bank’s overnight MCLR will be 7.95 per cent, while the MCLR for one month is 8.10 per cent. The three-month and six-month MCLRs are at 8.40 per cent and 8.80 per cent, respectively.

The HDFC Bank’s one-year MCLR, which affects all consumer loans, is 9.05 per cent, the two-year MCLR is 9.10 per cent, and the three-year MCLR is 9.20 per cent. A basis point is one-hundredth of one percentage point. 

Tenor	MCLR
Overnight	7.95%
1 Month	8.10%
3 Month	8.40%
6 Month	8.80%
1 Year	9.05%
2 Year	9.10%
3 Year	9.20%

Effective Date:  May 8, 2023  
 

HDFC Bank is the latest bank to revise its MCLR even as the Reserve Bank of India (RBI) kept the repo rate unchanged in its recent policy meeting in April. Following this, Bank of Baroda (BOB) and Canara Bank revised their MCLRs. 

Bank of Baroda hiked its MCLR by 5 basis points (bps) in select tenors, effective April 12. For overnight tenor, the lender raised its MCLR by 5 basis points to 7.95 per cent from 7.9 per cent earlier.  

The one-year MCLR was revised to 8.6 per cent from 8.55 per cent earlier. The MCLRs on other tenors were not changed by the lender. 

Canara Bank hiked its six-month and one-year MCLRs by 5 bps to 8.45 per cent and 8.65 per cent, respectively with effect from April 12. The lender has not changed its MCLRs for other tenors. 

However, SBI didn’t revise its MCLR since RBI’s last repo rate revision. For overnight tenor, the lender is offering 7.95 per cent, while its one month’s MCLR is 8.10 per cent. 

The three-month and six-month MCLRs are at 8.10 per cent and 8.40 per cent. The one-year, two-year, three-year MCLRs are at 8.50 per cent, 8.60 per cent, and 8.70 per cent, respectively. 

According to a study by India Ratings and Research, commercial banks are likely to increase the marginal cost of funds-based lending rate (MCLR) by 100-150 basis points (bp) in the next financial year (FY24) amid a rise in the cost of money and tight liquidity. The transmission of monetary policy in the banking system could intensify in FY24, the study highlighted. 

Responding to the repo rate rising since May 2022, banks have raised median MCLR (of one-year duration) by 120 basis points between May 2022 and February 2023, RBI data showed. The RBI has hiked the policy repo rate by 250 basis points in stages to 6.5 per cent in February 2023. In the last monetary policy meeting in April, the central bank kept the interest rates unchanged. 

MCLR-linked loans are mostly given to corporate and business establishments. These loans had 46.5 per cent share in outstanding floating rate rupee loans as of September 2022, according to RBI data. 

Ind-Ra said the drawdown by banks from the reverse repo in FY23 was to the tune of Rs 5 lakh crore. This has enabled banks to address a surge in the gap between incremental credit and deposit, and this will not be available in FY24. Therefore, MCLR will show a significant rise this fiscal.