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HDFC bank hikes MCLR by 35 basis points across all tenures

HDFC Bank, India’s largest private sector lender, has increased its marginal cost of funds based lending rate (MCLR) by 35 basis points across all tenures, with effect from June 7. HDFC Bank has increased its MCLR by 60 basis points since the Monetary Policy Committee MPC) hiked the benchmark policy rate by 40 basis points in early May.

This 35 basis points hike in MCLR by HDFC Bank comes a day ahead of the scheduled meeting of the MPC where there is speculation that the 6-member committee is likely to raise rates again.

What is MCLR?

The marginal cost of funds based lending rate (MCLR) is the minimum lending rate below which a bank is not allowed to lend. The MCLR replaced the earlier base rate system to determine the lending rates for commercial banks.

RBI implemented MCLR on 1 April 2016 to fix interest rates for loans. It is an internal reference rate for banks that determines how much interest they can charge on a loan. For this, they take into account the additional or incremental cost of arranging an additional rupee for a prospective buyer.

MCLR Rates of HDFC

According to the HDFC Bank website, the overnight MCLR is 7.50 per cent; The one month and three months MCLR are 7.55 per cent and 7.60 per cent, respectively; The six-month MCLR is 7.70 per cent; The one-year MCLR, two-year MCLR and three-year MCLR are 7.85 per cent, 7.95 per cent and 8.05 per cent.

Last week, several other lenders including HDFC Ltd, Punjab National Bank, ICICI Bank and Bank of India also hiked their MCLR.

HDFC had increased the interest rates on its home loans by 5 basis points with effect from June 1. It had raised rates by 30 basis points last month, post the hike in repo rate. India’s second-largest private sector bank, ICICI Bank, has increased its MCLR by 30 basis points with effect from June 1. Punjab National Bank has also increased its MCLR by 15 basis points from June 1. Bank of India also increased its MCLR on some tenors, effective June 1.

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