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HDFC Bank reduces MCLR by up to 10bps

BusinessToday.In     November 7, 2019

Private sector lender HDFC Bank has reduced marginal-cost based lending rate (MCLR) across tenors by as much as 10 bps. As per the bank's website, it has also reduced the base rate by 10 bps. HDFC bank has revised its MCLR figures is August earlier this year. The new rates will be effective from November 7.

According to HDFC Bank, MCLR for 6-month, 1-year and 2-year tenors have been reduced by 5 bps each to 8.10 per cent, 8.30 per cent and 8.40 per cent respectively. The 3-year MCLR has been reduced by 10 bps to 8.50 per cent. Rates for overnight, 1-month and 3-month tenors have been kept unchanged, though. The HDFC base rate has also been reduced 10 bps to 9.20 per cent.

HDFC Bank had reduced MCLR across all tenors in August earlier this year. MCLR is the minimum lending rate below which a bank cannot extend lend.

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The Reserve Bank of India has reduced 135 bps in five consecutive policy rate cuts since the beginning of this year. But the benefits were not being effectively passed on to the customers under the MCLR system.

To make the transmission of reduced lending rates smoother, RBI had asked all banks to adopt external benchmarks for all new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to Micro and Small Enterprises. The banks could opt for policy repo rate decided by the monetary policy committee, Government of India's 3-month and 6-month treasury bill yields published by the Financial Benchmarks India Private Ltd (FBIL), or any other benchmark market interest rate published by the FBIL.

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