HDFC Bank has raised its marginal cost of funds-based lending rate (MCLR) by 5 to 15 basis points across all seven tenures, a move that could increase borrowing costs for customers whose home, personal, auto or other floating-rate loans are linked to the benchmark. The revised rates came into effect on 7 November, according to a report by Aaj Tak Business.
Following the revision, HDFC Bank’s MCLR has moved into a range of 7.85% to 8.70%, compared with the earlier range of 7.75% to 8.55%. One basis point is equal to 0.01 percentage point. The increase is higher for several longer-duration benchmarks, which are commonly used in the pricing and resetting of some floating-rate loans.
The bank raised the MCLR for the six-month, one-year, two-year and three-year tenures by 15 basis points. The remaining tenures were increased by between 5 and 10 basis points. The change does not automatically mean that every HDFC Bank borrower will see an immediate increase in their monthly instalment.
The impact will depend on the benchmark specified in the loan agreement and the reset date applicable to the borrower’s interest rate. Customers with loans linked to other benchmarks may not be affected by this particular MCLR revision. Even for MCLR-linked loans, the revised rate may take effect only when the contractual reset date arrives.
For a loan illustration cited in the report, a borrower with a Rs 20 lakh MCLR-linked home loan for 20 years, priced at 8% interest, would pay an estimated monthly instalment of Rs 16,729. If the interest rate rises to 8.15%, the monthly instalment would increase to about Rs 16,916. This represents an increase of roughly Rs 187 per month, or close to Rs 200.
The exact change in a borrower’s repayment obligation will vary according to the outstanding principal, remaining loan tenure, applicable spread, benchmark and reset terms. A longer remaining tenure can also increase the total interest payable when the rate rises, even if the immediate monthly increase appears limited.
MCLR-linked borrowers can check their loan documents or contact the bank to confirm the applicable benchmark, spread and next reset date. The revised HDFC Bank MCLR rates will determine the pricing of eligible loans when their contractual reset cycles are applied.
