HDFC Bank Reduces Lending Rates For Short Term, Loans To Become Cheaper

HDFC Bank has reduced its marginal cost of fund-based lending rate (MCLR) by 5 basis points (bps) effective April 7, 2026. In March 2026, the bank cut MCLR rates for all tenures. This time, only short-term tenure rates have been reduced. On April 8, 2026, the Reserve Bank of India (RBI) concluded its monetary policy committee (MPC) meeting. The RBI kept the repo rate unchanged at 5.25 per cent. Repo rate is a component in MCLR calculation and impacts the final lending rates of banks. However, HDFC Bank had reduced its MCLR a day earlier. The MCLR now ranges from 8.10-8.55 per cent. 

The reduction in MCLR means cheaper equated monthly instalments (EMIs) for borrowers. After the revision, the HDFC Bank MCLR for overnight and one-month tenure has been reduced by 5 bps. The rate dropped from 8.15 per cent to 8.10 per cent. For a three-month tenure, it fell from 8.25 per cent to 8.20 per cent. Other rates remained unchanged.

Here are the details of MCLR changes over three months.

Marginal Cost Of Fund-Based Lending Rates (MCLR)

MCLR is the minimum rate of interest below which a bank is not allowed to offer loans. HDFC Bank reviews its MCLR every month. There are four components that are considered while determining MCLR. These include the bank’s marginal cost of funds, where repo rate plays a role, operating expenses, cash reserve ratio (CRR), and the tenure premium. Under the CRR requirement, banks are required to maintain a certain percentage of funds as a cash reserve with the RBI. As they cannot lend this money, it carries a negative effect on potential income, and this is taken into account in MCLR determination.

Banks use MCLR as the base and add a spread over it to decide the final rate of interest for different loans, including home loan, personal loan, and other consumer loans. That is why the rates differ for different loans. 

So, a reduction in MCLR is expected to reduce the final lending rates and subsequently reduce the burden on the borrowers’ pockets. Reduced lending rate may reduce the EMIs or the loan tenure. However, it may not always happen automatically. Borrowers need to contact the bank regarding this.