HDFC Bank cuts lending rates by 10 basis points, to affect select loan tenures

HDFC Bank has implemented a reduction in its Marginal Cost of Funds-based Lending Rates (MCLR) by up to 10 basis points for select loan tenures, impacting borrowers whose loans are linked to this internal benchmark. This adjustment, effective from November 7, means the bank’s MCLR now ranges between 8.35% and 8.60%, compared to the previous range of 8.45% to 8.65%. Borrowers with home, auto, or personal loans connected to the MCLR will see their interest rates adjusted at the time of their next reset period, in line with the revised rates. Customers whose loans are tied to external benchmarks, such as the Reserve Bank of India’s repo rate, will not be affected by this change.

The newly revised MCLR rates by tenure are as follows: Overnight and one-month tenures at 8.35%, three months at 8.40%, six months at 8.45%, one year at 8.50%, two years at 8.55%, and three years at 8.60%. The Marginal Cost of Funds-based Lending Rate, introduced by the RBI in 2016, is the internal reference rate used by banks to set lending rates for loans, considering the marginal cost of funds, operating expenses, and a tenure premium. This mechanism aims to ensure greater transparency in transmitting monetary policy changes to borrowers.

Borrowers with loans tied to the MCLR will experience rate changes during their upcoming reset periods, while those on external benchmarks remain unaffected. The revision reflects HDFC Bank’s response to internal and regulatory considerations around lending rates and follows the established practice for rate adjustment in line with MCLR methodology.