Lower EMIs incoming: HDFC Bank cuts MCLR following RBI repo rate cuts

HDFC Bank has announced a reduction in its Marginal Cost of Funds-based Lending Rates (MCLR), offering relief to borrowers whose loans are linked to this benchmark. The bank has lowered the MCLR by up to 15 basis points (bps) on select loan tenures. A basis point is one-hundredth of a percentage point, so a 15 bps cut translates to a 0.15% decrease in interest rates.

Following this revision, HDFC Bank’s MCLR now ranges from 9.00% to 9.20%, depending on the loan tenure. This marks a decrease from the previous range of 9.10% to 9.35% that was applicable during April 2025. The revised rates came into effect on May 7, 2025, according to an ET report.

This move comes after the Reserve Bank of India (RBI) reduced the repo rate by 25 bps in April, taking the total cut to 50 bps since February 2025. The repo rate is the rate at which the RBI lends money to commercial banks, and a reduction typically leads to lower borrowing costs across the banking sector. As a result, banks like HDFC Bank are now passing on the benefits of lower funding costs to customers through reduced lending rates.

What it means for borrowers

Borrowers with MCLR-linked loans—such as home loans—may experience a reduction in their EMIs (equated monthly installments) or enjoy a shorter loan tenure, depending on their loan terms and reset schedules.

Latest HDFC Bank MCLR Rates (Effective May 7, 2025):

• Overnight: 9.00% (down from 9.10%)
• 1 Month: 9.00% (down from 9.10%)
• 3 Month: 9.05% (down from 9.20%)
• 6 Month: 9.15% (down from 9.30%)
• 1 Year: 9.15% (down from 9.30%)
• 2 Year: 9.20% (down from 9.30%)
• 3 Year: 9.20% (down from 9.35%)

What is MCLR?

MCLR is the minimum interest rate a financial institution must charge for a specific loan. It determines the lower limit of the interest rate for a loan and is binding unless revised by the Reserve Bank of India. Introduced by the RBI in 2016, the MCLR is used for various floating-rate loans, including home, personal, and auto loans. A decrease in MCLR can lower loan EMIs or reduce loan tenure, depending on whether the loan is on a fixed or floating interest rate.