HDFC Bank has raised its marginal cost of funds-based lending rate (MCLR) by 5 to 15 basis points across all seven tenure categories, a move that could increase monthly instalments for borrowers whose loans are linked to the benchmark. The revised rates took effect on 7 November, according to a report by Aaj Tak Business.
The bank’s MCLR now ranges from 7.85% to 8.70%, compared with the earlier range of 7.75% to 8.55%. A basis point is equal to 0.01 percentage point. The increase is therefore between 0.05 percentage point and 0.15 percentage point, depending on the loan tenure.
The sharpest increases have been applied to the six-month, one-year, two-year and three-year MCLR tenures, each of which has risen by 15 basis points. Rates for the remaining tenures have been increased by between 5 and 10 basis points, according to the report.
The immediate effect will not be uniform across HDFC Bank’s customer base. The rate increase applies to borrowers whose loan agreements use MCLR as the interest-rate benchmark. Customers with loans linked to another benchmark may not see their interest rate or equated monthly instalment change because of this specific revision.
Home loans, personal loans, auto loans and other floating-rate borrowings can be affected where the applicable agreement is MCLR-linked. The actual increase in a borrower’s repayment will depend on the benchmark specified in the loan contract, the applicable spread over that benchmark and the reset date written into the agreement.
For example, the report estimates that a borrower with a ₹20 lakh MCLR-linked loan for 20 years could see the interest rate rise from 8% to 8.15%. At 8%, the monthly EMI is stated to be ₹16,729. At 8.15%, it would rise to ₹16,916, an increase of about ₹187 per month.
The example is based on a specific loan amount, tenure and interest rate, so the impact on individual customers will vary. A borrower’s outstanding principal, remaining tenure, spread and reset schedule will determine whether the repayment rises, the tenure changes, or both are adjusted under the terms of the loan agreement.
For housing borrowers, the change highlights the importance of checking the benchmark and reset clause in the loan documents rather than assuming that every floating-rate loan will respond in the same way. MCLR-linked loans are reset according to the applicable schedule, which means the revised rate may not necessarily reflect immediately in every borrower’s next instalment.
Customers can determine their likely exposure by checking whether their loan is linked to MCLR, identifying the relevant tenure and reviewing the next reset date. The reported revision affects the benchmark rates; the final rate charged to a customer also depends on the terms agreed with the bank. The revised MCLR schedule remains the next reference point for borrowers tracking future changes to their loan repayments.
