RBI Cuts Repo Rate, But HDFC Bank Hikes Loan EMI, Increases Loan Cost
HDFC Bank has raised its overnight MCLR, increasing loan EMIs despite a recent RBI repo rate cut, leaving borrowers surprised by the higher cost of loans.
RBI Cuts Repo Rate: The Reserve Bank of India recently reduced the repo rate from 6.50% to 6.25%, raising hopes of cheaper loans and lower EMIs. However, India’s largest private bank, HDFC Bank, has increased its Marginal Cost of Funds-based Lending Rate (MCLR), making loans more expensive.
HDFC Bank Raises MCLR
HDFC Bank hiked its overnight MCLR by 5 basis points, from 9.15% to 9.20%. This new rate is effective from February 7, 2025. Rates for other loan tenures remain unchanged, but the increase in MCLR affects various loan categories, including home loans, auto loans, and personal loans.
Impact on Borrowers
With this rise in MCLR, existing borrowers may see their EMIs go up, while new loans will be issued at higher rates. Though the repo rate cut by the RBI was expected to lead to cheaper loans, HDFC Bank’s decision has surprised many and adds to borrowers’ financial burden.
How MCLR is Determined
MCLR is influenced by factors such as deposit rates, operational costs, repo rates, and cash reserve requirements. Any change in these components can lead to an increase or decrease in lending rates. In this case, HDFC Bank’s revised MCLR affects only overnight loans, leaving other loan tenures untouched.
HDFC Bank’s decision to increase MCLR, despite the RBI’s repo rate cut, underscores the complexity of interest rate adjustments. Borrowers must stay informed and explore their options to manage their EMIs effectively.
