Loans To Get Cheaper From This Private Bank By Few BPS

HDFC Bank, one of the largest private bank player has revised its marginal cost based lending rate (MCLR) for certain terms by up to 85 basis points(bps) {1 basis point is equivalent to 0.01%}. The revised are shared on the Bank's website, which have been effective from April 10, 2023.

Post the rate reduction, overnight MCLR is slashed by 85 basis points to 7.80% from 8.65% previously. According to the bank website, the MCLR for one month has been reduced by 70bps point from 8.65% to 7.95%.

Meanwhile the 3-month MCLR was slashed by 40 bps to 8.30% from 8.7 % earlier, and for 6-it was cut by 10 bps to 8.7% from 8.80.

Marginal Cost Of Funds-Based Lending Rates (MCLR) effective from April 10, 2023 is given below.

After April 1, 2016, all floating rates are based MCLR. The Marginal Cost Based Lending Rate is the minimum interest rate that a financial institution charges for a specific loan. It indicates the lower limit of the interest rate for a loan. This rate limit is set by borrowers unless otherwise specified by the Reserve Bank of India, as per the HDFC Bank.

While disbursing loans, the banks generally take into account the MCLR prevailing on that day. Banks also allot reset dates of the loans and that the interest rate will change to the MCLR prevailing on the reset date. The periodicity to reset is generally one year or lesser depending on the loan agreement with the bank.

The loans linked to MCLR will come with a spread barand. It means the amount or margin that the borrowers have to pay over the MCLR. Banks have the liberty to set the range of spread on different loans.

The deposit rates, repo rates, operating costs, and the cost of maintaining the cash reserve ratio generally determine the MCLR rate. Thus any change in the repo rate impacts the MCLR rate. The decision to revise the MCLR by HDFC occurred after after the Reserve Bank of India (RBI) kept the repo rate unchanged at 6.5% in its bi-monthly monetary policy meeting held on April 6, 2023.