Loan EMIs to go up as leading bank hikes lending rates

Mumbai: A leading private sector lender in the country, HDFC Bank has hiked the marginal cost of funds-based lending rate (MCLR). The bank has increased the lending rates by 5 basis points (bps) to 15 basic points.

This MCLR rate hike by HDFC is the second in the two-month period. Earlier on May 8, the HDFC Bank increased MCLR rates from 5 to 15 basis points.

The overnight MCLR would increase by 15 basis points to 8.10%. The MCLR rate for a one-month period has been increased to 8.20% and the new rate for a three-month MCLR is 8.50%. The 1-year MCLR, the 2-year MCLR, and the 3-year MCLR will remain unchanged.

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After this hike, the Equated Monthly Installments (EMI) of most consumer loans such as auto or home loans will become costlier for consumers.

The basic minimum rate at which a bank can give consumers loans is known as the marginal cost of funds-based lending rate or MCLR. The Reserve Bank of India (RBI) has established MCLR in 2016. It was introduced to determine the interest rates of different types of loans. Borrowers’ EMI will get expensive for those who take loans against the MCLR. There is a reset-period for MCLR-based loans, after which the rates get revised for the borrower.