HDFC Bank has hiked MCLR by up to 10 basis points (bps). According to the bank website, the overnight MCLR is now 8.60%. The MCLR for one month is 8.60% and the three-month and six-month MCLRs will be 8.65% and 8.75%. The one-year MCLR, which is connected to many consumer loans, will now be 8.90% from 8.85%, the two-year MCLR will be 9%, and the three-year MCLR will be 9.10%.
| Tenor | MCLR |
| Overnight | 8.60% |
| 1 Month | 8.60% |
| 3 Month | 8.65% |
| 6 Month | 8.75% |
| 1 Year | 8.90% |
| 2 Year | 9.00% |
| 3 Year | 9.10% |
What is MCLR
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.
What are the differences between an MCLR rate and the base rate?
According to the HDFC Bank website, “When it comes to Base Rate vs MCLR, here are some of the points to know. Specifically, there are four critical points of difference you should be aware of. They are:
| Base Rate | MCLR |
| The basis of this interest rate depends on the average cost of funds. | The basis of the rate depends on the marginal cost of funds. |
| The operating expenses and expenses to maintain the cash reserve ratio are vital in determining the base rate. | The deposit rates, repo rates, operating costs and the cost of maintaining the cash reserve ratio determine the MCLR rate. |
| The base rate is not dependent on the changes made to the Repo rate. | MCLR is dependent on the changes made to the Repo rate. |
| The MCLR varies according to the tenure of the given loan. | Lenders can change the Base rate every quarter. |
The Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) will announce the policy rates on February 8, 2023.