HDFC Bank has cut its marginal cost of funds-based lending rate (MCLR) by 5 basis points (bps) across tenors and the new rates will be effective from 8 June, according to the private lender's website.
HDFC Bank said that its overnight MCLR stands reduced to 7.30 percent, while one-month MCLR is 7.35 percent.
One-year MCLR, to which many of the consumer loans are tied, will now be 7.65 percent, while three-year MCLR has been set at 7.85 percent.
The move comes amid similar steps taken by the peers after two rate cuts by the Reserve Bank of India (RBI) in order to help the economic growth rise in the aftermath of the COVID-19 pandemic.
Since the COVID-19 outbreak, RBI has reduced its repo rate by 1.15 percent to a record low of 4 percent.
Earlier this week, the State Bank of India (SBI) reduced its MCLR by 25 basis points (bps) across all tenors to reduce its one-year MCLR to 7 percent and base rate to 7.40 percent with effect from 10 June.
Banks review their MCLR every month. Lately, some part of the lending has also been linked directly to external benchmarks, such as the repo rate, for a better transmission of policy actions.
Note that since retail loans disbursed after 1 October are directly linked to an external benchmark as directed by the Reserve Bank of India's (RBI), only loans issued prior to the date will be affected by the MCLR cut.