Big shock to borrowers! HDFC Bank Raises MCLR, How Much EMI Raised?

HDFC Bank has increased its lending rates by up to 15 basis points (bps) for all tenures. This may increase the cost of loans for customers whose loans are linked to the ‘Marginal Cost of Funds-Based Lending Rate’ (MCLR). These new rates are effective from November 7. After this change, the bank’s MCLR rate is between 7.85 percent and 8.70 percent, while earlier it was between 7.75 percent and 8.55 percent.

The new rates are as follows

• Overnight (for one night): It increased by 5 bps from 7.80 percent to 7.85 percent.
• One month: It has increased from 7.75 percent to 7.85 percent with an increase of 10 bps.
• Three months: It has increased from 7.95 percent to 8.05 percent with an increase of 10 bps.
• Six months: It increased by 15 bps from 8.15 percent to 8.30 percent.
• one year: It increased by 15 bps from 8.30 percent to 8.45 percent.
• Two years: It increased by 15 bps from 8.40 percent to 8.55 percent.
• Three years: It has increased from 8.55 percent to 8.70 percent with an increase of 15 bps.

Which debtors will be affected?

The increase will affect those HDFC Bank customers whose existing loans are linked to MCLR. This may include customers taking home loans, personal loans and other types of loans, depending on their loan agreement. However, this change does not necessarily increase everyone’s EMI immediately. Its actual effect depends on which ‘interest rate reset date’ is specified in the loan agreement. Borrowers will need to check their loan statements and payment schedules to know when the new rates will apply to them.

What is MCLR?

MCLR is the minimum interest rate below which banks generally cannot lend. However, this can be done in some special cases as permitted by the Reserve Bank of India (RBI). It is calculated based on factors such as the bank’s cost of funds, operating costs and cost of maintaining cash reserves. For borrowers, an increase in MCLR may result in higher interest charges when their loan rates are reset. Depending on the terms of the loan, banks may increase the EMI or extend the loan repayment period.