India's largest bank in terms of market share, HDFC Bank has revised its marginal cost of funds-based lending rates (MCLR) with effect from September 7, 2024. The highest MCLR is of 9.45%, while the lowest is of 9.10%.
Check Latest Interest Rates - September 2024:
As per the website, MCLR rates have been revised with effect from September 7, 2024.
1-year MCLR is now at 9.45% at HDFC Bank, while the rate is similar on 2-year and 3-year tenures as well.
Further, 6-month MCLR is at 9.40%, while 3-month MCLR is at 9.30%. Additionally, on short term tenures such as 1-month and overnight, the MCLR is set at 9.15% and 9.10% respectively.
What Are MCLR Rates?
The Marginal Cost of the Fund-Based Lending Rate or the MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan. This rate limit is set in stone for borrowers unless specified otherwise by the Reserve Bank of India.
Some of the key factors of MCLR are that:
- The basis of the rate depends on the marginal cost of funds.
- The deposit rates, repo rates, operating costs and the cost of maintaining the cash reserve ratio determine the MCLR rate.
- MCLR is dependent on the changes made to the Repo rate.
- The MCLR varies according to the tenure of the given loan.
However, from October 1, 2019, RBI introduced external benchmark lending rates including linking lending rates with policy repo rates. And directed the scheduled commercial banks to transmit to external benchmarks since MCLR did not deliver effective transmission of monetary policy. However, existing loans and credit limits linked to the MCLR/Baserate/BPLR will continue till repayment or renewal, as the case may be.
Accordingly, not all borrowers will be affected by the revision in MCLR by HDFC Bank.
In August 2024 monetary policy, RBI keeps the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50 per cent. Consequently, the standing deposit facility (SDF) rate remains unchanged at 6.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 6.75 per cent.
Also, the MPC also decided to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.
Notably, these decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
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