HDFC Bank Loans Get Cheaper With Reduced Interest Rates: Check The Latest Lending Rates

HDFC Bank has reduced its lending rates to pass on the reduced repo rate benefits to borrowers. Effective July 7, 2025, the bank has lowered its marginal cost of funds-based lending rates (MCLR) by 0.30 per cent, or 30 basis points (bps) across tenures. As one of the largest banks in India, this reduction would impact many borrowers with floating-rate loans. Borrowers who have already taken out a loan or are planning to do so with HDFC Bank can benefit from the rate cut. It will be less financially burdensome as the borrowers will need to shell out a lesser amount out of their pocket.

HDFC Bank MCLR, effective July 7, 2025:

Tenure                                    MCLR

Overnight                               8.60% 

1 Month                                  8.60% 

3 Months                                8.65% 

6 Months                                8.75% 

1 Year                                      8.75% 

2 Years                                    8.75% 

3 Years                                    8.80% 

Source: Bank website

What Is MCLR?

The MCLR is the minimum interest rate at which a bank can offer a loan to borrowers. In other words, it cannot lend money to borrowers below this rate. The Reserve Bank of India (RBI) introduced the concept of MCLR on April 1, 2016. This replaced the previous system of base rate. Banks set the MCLR rates internally per their requirement and based on a calculation.

How Do Banks Decide MCLR?

Banks consider their marginal cost of funds, operating expenses, cash reserve ratio, and tenor premium to determine the MCLR. So, the cost at which banks secure money is the key factor in determining their MCLR. Here, the marginal cost of funds refers to how a bank sources its funds from different sources and the costs it pays for them. These sources include demand and time deposits, borrowings from other banks, and borrowings from the RBI. That is where the repo rate comes into the picture. If the RBI cuts the repo rate, MCLR tends to reduce, and vice versa. Based on these components, every bank decides its own MCLR.   

How Does It Affect Loan Rates?

MCLR is the rate at which banks add the spread or the profit margin. The total of it becomes the final rate of interest for different loans. For instance, at present, its MCLR is 8.75 per cent. Assuming a spread of 2 per cent, the final interest rate would become 10.75 per cent (8.75 per cent + 2 per cent) for borrowers.

As MCLR is tenor-linked, the interest rate varies for different loan tenures. Due to its link with the repo rate, MCLR reflects the RBI's rate changes faster for customers.

The 30 bps rate cut in MCLR across tenures will affect HDFC's floating rate loans, including home loans, personal loans, and business loans, making them more affordable for borrowers.