Super News for Borrowers! HDFC Bank Cuts Lending Rates Before RBI MPC Decision; Loan Relief Incoming

India's largest private sector bank, HDFC Bank has announced a major revision in its lending rate, which could reduce the borrowing cost for many customers. HDFC Bank has trimmed its Marginal Cost of Funds-based Lending Rates (MCLR) by 10 basis points (bps) across several loan tenures. The new MCLR rates came into effect yesterday, on April 7, 2025, just ahead of the upcoming RBI Monetary Policy Committee (MPC) meeting announcement, which is scheduled for tomorrow, April 9.

Effective April 7, the new HDFC Bank's one-month MCLR now stands at 9.10%, while the three-month rate is set at 9.20%. For six-month, one-year, and two-year loans, the MCLR is revised to 9.30%, and for three-year loans, it is 9.35%. With this adjustment, HDFC Bank's MCLR range now falls between 9.10% and 9.35%, down from the previous range of 9.20% to 9.45%, making loans linked to MCLR slightly cheaper for borrowers.

Previously, on February 7th, HDFC Bank had increased its Marginal Cost of Funds-based Lending Rate (MCLR) for the overnight tenure by 5 basis points. from 9.15% to 9.20%,

What is MCLR?

Introduced in 2016 by the RBI, the Marginal Cost of Funds-based Lending Rate (MCLR) is the minimum interest rate below which a bank cannot lend (except in specific cases). It is closely linked to the bank's cost of funds and is revised periodically. When MCLR is reduced, new borrowers and existing customers whose loans are MCLR-linked can benefit from lower interest rates.

What would be the impact of the rate cut on borrowers?

This rate cut is a positive sign for borrowers with loans linked to MCLR, such as home loans, auto loans, and personal loans. With the MCLR down by 10 bps, these borrowers will now pay lower EMIs, which will have an overall savings on interest outgo.

This reduction in MCLR comes just days before the RBI's April 2025 MPC meeting, where the central bank is expected to maintain a cautious stance amid sticky inflation and global uncertainties.

The Reserve Bank of India (RBI) is set to announce the outcome of its Monetary Policy Committee (MPC) meeting tomorrow, April 9. The three-day meeting began on April 7 and has kept investors, banks, and borrowers eagerly awaiting the central bank's decision on interest rates.

According to a poll conducted by GoodReturns.in, most economists believe that the RBI will reduce the repo rate by 25 basis points (bps). Out of 33 economists surveyed, 29 have predicted this rate cut. This would bring down the cost of borrowing, potentially benefiting home loan, car loan, and personal loan borrowers with lower EMIs.

Experts say the RBI is likely to go for a rate cut to support economic growth, especially in the backdrop of ongoing global uncertainty triggered by US President Donald Trump's aggressive trade policies.