HDFC Bank Increases MCLR For Overnight Tenure By 5 Bps, Here’s How It Will Impact You

HDFC Bank has hiked its marginal cost of funds-based lending rates (MCLR) for the overnight tenure by 5 basis points (bps) from 9.15 per cent to 9.20 per cent. The update will be implemented on February 7, 2025 onwards, according to the bank’s website. 

Rates of all other tenures will remain the same. Overall, HDFC Banks’ MCLR has been fixed at 9.20 per cent for overnight as well as one-month tenure, and 9.45 per cent for three-year tenure. 

Revised HDFC MCLR Rates  

Overnight tenure — 9.20 per cent 

One-month tenure — 9.20 per cent 

Three months tenure — 9.30 per cent 

Six months tenure — 9.40 per cent 

One-year tenure — 9.40 per cent 

Two years tenure — 9.45 per cent 

Three years tenure — 9.45 per cent 

RBI MPC Cuts Repo Rate 

Despite the Reserve Bank of India (RBI) announcing a repo rate cut by 25 bps to 6.25 per cent, HDFC Bank hiked its MCLR rate for overnight tenure. The repo rate cut was the first cut announced after almost five years. The announcement was made by RBI Governor Sanjay Malhotra on February 7, 2025. 

What Is MCLR and its Impact? 

MCLR is the minimum rate of interest a bank sets for loans. It is usually the lower limit for lending rates unless it is changed by the central bank. The RBI launched MCLR in 2016 to enable fair pricing for borrowers. 

Borrower with loans associated with MCLR will get the impact of changes in their equated monthly instalments (EMIs) on loans, whenever MCLR rates are changed. 

For a borrower who took a loan before 2016, the base rate or the benchmark prime lending rate (BPLR) will still be applicable. 

In case of an increase in MCLR, EMIs for loans, including home loans, personal loans, business loans, and so on will also increase. MCLR rate is directly proportional to the rate of interest of a loan linked with MCLR. 

How Does A Bank Decide MCLR? 

The cost of borrowing depends on the marginal cost of funds, with borrowing expenses usually accounting for 92 per cent of the weight. These are calculated on the basis of: 

Operating fee of collection and servicing of loans 

Cash reserve ratio or CRR, which is the cost of maintaining the needed reserves with RBI, and 

Tenure premium, which is an extra fee applicable on long-term loans in order to distribute the risk over a long period.