HDFC Bank, the largest bank in the country by market value, has given a big gift to the customers taking loans before Diwali. The bank has announced a reduction in loan interest rates, which may reduce the monthly Loan EMI. The expectations of borrowers have increased due to reduction in MCLR.
Loan borrowers will get relief
- HDFC Bank is the largest private sector bank with a market value of about Rs 15 lakh crore. It is second in the list of top-10 valuable companies after Reliance Industries.
- The bank has cut its Marginal Cost of Funds-based Lending Rate (MCLR), which can provide major relief to borrowers taking loans of various tenures and reduce their EMIs.
New interest rates after deduction
- Overnight MCLR: 8.55% → 8.45%
- 1 month: decreased to 8.40%
- 3 months: 8.45%
- 6 months and 1 year: 8.55%
- 2 years: 8.60%
- 3 year: 8.65%
- Earlier the rates were between 8.55% to 8.75%.
- The bank has reduced rates by up to 15 basis points on select tenures.
What is MCLR?
- MCLR is the minimum interest rate that a bank can charge on a loan. It serves as the base rate for home loans, personal loans and commercial loans.
- The Reserve Bank of India (RBI) introduced MCLR in 2016 so that borrowers are not charged less than the minimum interest rate.
Impact on loan takers
- MCLR directly affects the interest rate of the loan. The direct impact of the deduction will be visible in the monthly EMI of home loan and personal loan borrowers.
- HDFC Bank home loan rates currently range between 7.90% to 13.20%, depending on the borrower profile and loan type.
- The bank has especially taken steps to reduce the EMI burden on customers taking floating loans.
Main factors determining MCLR
- bank deposit rate
- Repo rate and reserve repo rate
- operational cost
- Cost of maintaining cash reserve ratio
The benefit of this deduction will fall directly on the pockets of the customers and there is news of relief for those taking loans before Diwali.
