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MCLR Hiked; How Much Home Loan, Car Loan EMIs Will Increase?

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MCLR Hiked; How Much Home Loan, Car Loan EMIs Will Increase?

HDFC Babk MCLR Rate Hike: India’s largest private sector lender HDFC Bank has hiked its MCLR across all tenors, the bank has said in a notification. The marginal cost of lending rate, or MCLR, a key point in deciding loan interests, has been hiked by 25 basis points. Here, it must be noted that one basis point equals to one-hundredth part of a percentage point. This means that loan interests will increase by 0.10 per cent with the HDFC Bank MCLR rate hike. The move comes almost a week after the Reserve Bank of India hiked its key lending rates to tackle inflation in the country.

The HDFC Bank MCLR rate hike will mean that loan interests for new and existing borrowers are set to increase, including equated monthly installments (EMIs) for home loan, vehicle loan and any other loan related to marginal cost. This is a direct result of the RBI hiking its repo rates, as any tweak in repo rate will also affect the marginal cost and hence change the MCLR.

Here are the tenor-wise MCLR effective from May 7, 2022, as per the HDFC Bank website:

Over night: Old rate — 6.90 per cent; New rate —  7.15 per cent

One Month: Old rate — 6.95 per cent; New rate — 7.20 per cent

Three Month: Old rate — 7.00 per cent; New rate — 7.25 per cent

Six Month: Old rate — 7.15 per cent; New rate 7.35 per cent

One Year: Old rate — 7.25 per cent; New rate 7.50 per cent

Two Years: Old rate — 7.35 per cent; New rate 7.60 per cent

Three Years: Old rate — 7.45 per cent; New rate 7.70 per cent

“The Marginal Cost of the Fund-Based Lending Rate or the MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan. This rate limit is set in stone for borrowers unless specified otherwise by the Reserve Bank of India,” said the HDFC Bank on its website.

In a surprise move on May 4, the Reserve Bank of India (RBI) hiked its key repo rate to 4.40 per cent, by 40 basis points in order to tackle inflation, which has remained higher than the target mark of 6 per cent over the past few months. Following this, banks have been hiking their MCLR rates for the first time in three years. The HDFC Bank MCLR hike comes days after the State Bank of India (SBI), Bank of Baroda, Axis Bank and Kotak Mahindra Bank also announced similar decisions.

MCLR or marginal cost of lending rate is a benchmark interest rate, which is the minimum rate of interest banks are allowed to give out loans to its customers. With the increase in the MCLR, HDFC Bank home and other loan borrowers may not be happy as the interests are most likely to go up.

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