HDFC Bank reduces MCLR by up to 85 bps

 

Subheading: HDFC Bank has announced a reduction in its Marginal Cost of Funds-based Lending Rate (MCLR) by up to 85 basis points (bps).

 

HDFC Bank, one of India's largest private sector banks, has announced a reduction in its Marginal Cost of Funds-based Lending Rate (MCLR) by up to 85 basis points (bps). The move is expected to bring down the cost of borrowing for customers, including those with home loans, personal loans, and other forms of credit.

 

What is MCLR?

 

MCLR is the benchmark rate that banks use to determine the interest rate on loans. It is based on the cost of funds for the bank, which includes factors such as the repo rate set by the Reserve Bank of India (RBI), the cost of deposits, and other factors. The MCLR is revised periodically and reflects changes in the cost of funds for the bank.

 

Reduction in MCLR

 

HDFC Bank has announced a reduction in its MCLR by up to 85 bps across various tenors, ranging from overnight to three years. The new rates will come into effect on August 7, 2021. The bank has also reduced the interest rate on its savings accounts by 25 bps, effective from July 31, 2021.

 

The reduction in MCLR is expected to bring down the cost of borrowing for customers, especially those with home loans, personal loans, and other forms of credit. It will also help stimulate demand for credit, which has been sluggish due to the economic slowdown caused by the COVID-19 pandemic.

 

Impact on customers

 

The reduction in MCLR is good news for customers who have taken loans from HDFC Bank, as it will bring down their monthly EMI payments. For example, a borrower with a home loan of Rs 50 lakhs for 20 years at an interest rate of 8.5% would have a monthly EMI of Rs 45,243. With the reduction in MCLR by 85 bps, the new interest rate would be 7.65%, and the monthly EMI would come down to Rs 42,424, a reduction of over Rs 2,800.

 

The reduction in interest rates on savings accounts is not good news for depositors, as it will lower the interest earned on their deposits. However, the impact on depositors is likely to be small, as savings account interest rates are already low.

 

Conclusion

 

HDFC Bank's decision to reduce MCLR by up to 85 bps is expected to provide relief to borrowers and stimulate demand for credit. The move comes at a time when the economy is struggling due to the COVID-19 pandemic, and demand for credit is weak.