HDFC Bank raises lending rates by up to 10 basis points; MCLR-linked loan EMIs may rise

The revised rates came into effect on June 8.

The increase means that borrowers with MCLR-linked home, vehicle and personal loans could see their equated monthly instalments (EMIs) rise or loan tenures extend when their next interest-rate reset date arrives.

Loans linked to external benchmarks such as the RBI’s repo rate will not be directly affected by the revision.

The latest revision comes after a series of MCLR reductions earlier this year. In March, the lender had lowered MCLR by up to 10 bps, while selective cuts were also announced in January and April as banks adjusted lending rates amid changing liquidity and funding conditions.

(Source: HDFC Bank)
The sharpest increase was seen in the two-year MCLR, which rose by 10 bps, while most other tenures witnessed a 5-bps increase. The one-month benchmark remained unchanged.

What is MCLR and why does it matter?

MCLR is the minimum lending rate below which banks generally cannot lend, except in certain cases permitted by the Reserve Bank of India. It serves as the benchmark for pricing several floating-rate loans, particularly older home and retail loans. Any increase in MCLR typically translates into higher borrowing costs for customers once their loan reset cycle is due.

Why are banks raising MCLR?

While the RBI recently kept the repo rate unchanged, banks can still revise MCLR based on their own funding costs, deposit rates and liquidity conditions.

The latest move by HDFC Bank indicates that internal cost-of-funds considerations continue to influence lending-rate decisions despite a stable policy rate environment.

The revision follows similar actions by other lenders. Last month, Canara Bank raised its MCLR by 5 bps across tenures, signalling that some banks are recalibrating lending rates amid evolving market conditions.