HDFC Bank hikes lending rates by up to 5 bps: What this means for borrowers

HDFC Bank has adjusted its marginal cost of funds-based lending rates (MCLR) for two short-term tenures by up to 5 basis points (bps). With this change, the revised MCLR interest rates will range from 9.15% to 9.50%, effective from November 7, 2024.

 

What's changed?

 

The rate adjustment raises the overnight and one-month tenures by 5 basis points each, with a similar 5 bps increase for the three-year tenure. No other tenure has been affected in this revision.

 

Overnight MCLR now stands at 9.15%, up from 9.10%

One-month MCLR is set at 9.20%, previously 9.15%

Three-month MCLR remains unchanged at 9.30%

 

Six-month, one-year, and two-year MCLR rates remain at 9.45%

The three-year MCLR moves to 9.50%

 

Detailed breakdown of MCLR rates (Effective November 7, 2024)

 

Overnight: 9.15%

1 Month: 9.20%

3 Months: 9.30%

6 Months: 9.45%

1 Year: 9.45%

2 Years: 9.45%

3 Years: 9.50%

 

MCLR: Benchmark for pre-2019 retail loans

 

MCLR served as the mandatory benchmark rate for floating-rate retail loans, such as home loans, issued by banks between April 2016 and September 2019. “If you had taken a retail loan in that period, your loan will be linked to an MCLR produced by that bank,” says Adhil Shetty, CEO, BankBazaar. However, since October 2019, the RBI-produced repo rate became the mandatory benchmark, while older loans from before that shift may still be linked to MCLR.

 

MCLRs vary by tenure, from overnight to three-year terms, with many banks benchmarking retail loans to the one-year MCLR. "If any bank updates its MCLRs today, any retail loans linked to those updated MCLRs will see a rate revision. The timing of the revision depends on the intervals specified in the loan contract, typically every six months or annually. Borrowers will see revisions in their rate if the one-year MCLR is updated—which has not happened in this case,” Shetty explains.

 

Shetty suggests borrowers review their loan agreements to understand their benchmark rates and reset intervals. "This can clarify when interest rates would be impacted," he adds.

 

For borrowers with a substantial loan balance or longer tenure remaining, Shetty also advises considering refinancing to a repo-linked loan, “where rate adjustments are transparent and may be comparatively lower for eligible borrowers.”

 

HDFC Bank's base and prime lending rates

 

The bank's benchmark prime lending rate remains unchanged at 17.95%, effective from September 9, 2024. Additionally, the base rate holds steady at 9.45%.

 

Home loan rates for salaried and self-employed borrowers

 

HDFC Bank offers varying home loan interest rates for salaried and self-employed individuals, based on the policy repo rate.

 

Special rates: Repo rate + 2.25% to 3.15%, translating to 8.75% to 9.65%

Standard rates: Repo rate + 2.90% to 3.45%, resulting in a range of 9.40% to 9.95%

 

According to the HDFC Bank website, these home loan rates apply to loans under its Adjustable Rate Home Loan Scheme, with floating interest rates that may vary based on market conditions. The rates are pegged to HDFC Bank’s repo rate, ensuring that customers experience rate adjustments throughout the loan tenure.