The country’s largest private sector bank, HDFC Bank has given a big shock to millions of its customers. The bank has decided to increase its ‘Marginal Cost of Funds-Based Lending Rate’ (MCLR) for different loan tenures. After this move, EMIs for term loans like home loan, car loan and personal loan are expected to increase in the coming days.
**New rates applicable from today**
According to the information given on the official website of HDFC Bank, the changed rates have come into effect from today, July 7. The bank has increased MCLR by 5 to 10 basis points (bps) for certain periods. This will have a direct impact on those customers whose loans are linked to MCLR.
**What are the new rates?**
After the hike, the changed MCLR rates for different tenures in HDFC Bank are as follows:
***Overnight MCLR:** Increased by 5 basis points, from 9.00% to 9.05%.
**One month MCLR:** This rate has now become 9.10%.
**Three month MCLR:** Has changed to 9.25%.
**Six-month MCLR:** This long-term benchmark has increased to 9.40%.
**One-year MCLR:** The most important benchmark – to which most home and auto loans are linked – now stands at 9.45%.
**Two-year and three-year MCLR:** These rates have also increased to 9.50% and 9.55% respectively.
**What effect will this have on your pocket?**
Loan borrowers should note that the increase in MCLR does not have an immediate impact on their EMI. The new interest rates will be applicable only when the ‘reset date’ of your loan arrives. For example, if the reset period of your home loan is of one year, your EMI will increase based on the new rates (9.45%) after the completion of that one year period.
What is MCLR?
Marginal Cost of Funds-Based Lending Rate (MCLR) is the minimum interest rate below which a bank cannot give a loan to a customer. Banks decide this rate every month – based on Reserve Bank of India (RBI) guidelines – taking into account their cost of funds. The increase in MCLR simply means that borrowing becomes expensive for customers.
