HDFC Bank Hikes MCLR: After increasing the repo rate of RBI, one after the other all bank loans are becoming expensive. HDFC Bank, the largest private sector lender, has also announced to increase the Marginal Cost of Lending Rate (MCLR) by 25 basis points. After which many types of loans including home loan, car loan, education loan and personal loan will now become expensive as well as the customers of the bank will have to pay expensive EMI.

How much increased MCLR
HDFC Bank has reduced the overnight ACLR to 7.15 percent, one-month ACLR to 7.20 percent, three-month ACLR to 7.25 percent from May 7. So the MCLR rate for 6 months has been reduced to 7.35 percent. The one-year MLCR has been increased to 7.50 percent, two-year MCLR from 7.60 percent to 7.45 percent and three-year MCLR to 7.70 percent.

Effect of raising RBI’s repo rate and CRR
In fact, on May 4, 2022, the RBI has suddenly announced a 40 basis point increase in the repo rate to 4.40 percent and a 50 basis point increase in the Cash Reserve Ratio ie CRR to 4.50 percent. After which, from banks to housing finance companies, the interest rate is getting expensive.

More banks can increase MCLR
Earlier, SBI, Axis Bank, Bank of Baroda, Kotat Mahindra Bank and Yes Bank have also increased the MCLR. After the increase in MCLR, the EMI of the existing customers who have taken loans from these banks will become expensive after the loan reset date. RBI had said in its order that all loans taken after April 1, 2016 should be linked to MCLR.

What is MCLR
According to the new guidelines of RBI, now in lieu of the base rate, commercial banks pay the marginal cost of funds based on the basis of lending rate (MCLR). Marginal Cost of Funds plays an important role in determining the MCLR. Any change in the repo rate results in a change in the Marginal Cost of Funds. When the time comes for home loan customers to review their home loan interest rates, their EMIs will become costlier due to the increase in MCLR.

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