HDFC, PNB, others reduce MCLR, lowering EMIs for borrowers
What's the story
Several leading banks, including HDFC Bank, Punjab National Bank, Bank of Baroda, Indian Overseas Bank, and Central Bank of India, have slashed their Marginal Cost of Funds-based Lending Rates (MCLR) in September. The move is likely to benefit borrowers with lower EMIs or shorter loan tenures on floating rate loans like home, personal, and vehicle loans. However, it's important to note that most new floating-rate loans are now linked to the External Benchmark Lending Rate (EBLR) rather than MCLR.
MCLR explained
What is MCLR, and how does it work?
MCLR is a benchmark rate that banks use to determine interest rates on floating-rate loans. It takes into account a bank's cost of funds, operating expenses, and profit margin. A cut in MCLR usually benefits existing borrowers by reducing EMIs or shortening loan tenures. However, most new floating-rate loans are linked to EBLR, not MCLR.
Rate cuts
PNB has cut MCLR by 5-15 bps
Punjab National Bank has cut its MCLR by 5-15 basis points (bps) across most tenures, effective September 1. The one-year MCLR now stands at 8.80%, while the overnight and three-month rates are at 8% and 8.45%, respectively. Bank of Baroda has cut its overnight MCLR by 10 bps to 7.85% and three-month rate by 15 bps to 8.20%, effective September 12.
Additional cuts
BOI, HDFC Bank's cuts
Bank of India has also reduced its MCLR across most tenures (except overnight) by 5-15 bps, effective September 1. The three-year rate has been reduced to 9%. HDFC Bank has cut its MCLR on select tenures by 5 bps. The six-month and one-year rates now stand at 8.65% while the two-year rate is at 8.70%.
Further adjustments
IOB, CBI have also reduced rates
Indian Overseas Bank has cut its overnight, one-year, two-year, and three-year MCLR by 5 bps, effective September 15. The one-year and two-year rates now stand at 8.85% while the three-year rate is at 8.90%. Central Bank of India has also announced cuts across select tenures but details are still awaited.