HDFC Bank cuts MCLR by up to 10 bps: How it may affect your loan EMI | Personal Finance

 

HDFC Bank has cut its Marginal Cost of Funds-based Lending Rates (MCLR) by up to 10 basis points (bps) across all seven listed tenures, potentially lowering borrowing costs for customers whose loans are linked to these benchmarks.

 

The revised rates came into effect on September 7, 2026. HDFC Bank’s MCLR range has moved down to 7.90-8.60 per cent, from 8-8.65 per cent in August.

 

However, the cut does not mean every borrower will immediately see a lower equated monthly instalment (EMI). The actual impact depends on the benchmark linked to the loan, its reset frequency and the spread charged by the bank.

  

The bank has reduced all seven listed MCLR rates, with cuts ranging from 5 bps to 10 bps:

 

Overnight: 7.90 per cent, down from 8 per cent in August — a 10-bps cut.

 

One month: 7.90 per cent, down from 8 per cent — a 10-bps cut.

 

Three months: 8.05 per cent, down from 8.15 per cent — a 10-bps cut.

 

Six months: 8.25 per cent, down from 8.30 per cent — a 5-bps cut.

 

One year: 8.35 per cent, down from 8.40 per cent — a 5-bps cut.

 

Two years: 8.45 per cent, down from 8.55 per cent — a 10-bps cut.

 

Three years: 8.60 per cent, down from 8.65 per cent — a 5-bps cut.

 

A basis point is one-hundredth of a percentage point. A 10-bps reduction means the benchmark has fallen by 0.10 percentage point, while a 5-bps cut means a reduction of 0.05 percentage point.

 

The overnight and one-month MCLR are now the lowest among HDFC Bank’s seven listed benchmarks, at 7.90 per cent. The three-year MCLR remains the highest at 8.60 per cent.

 

Why the cut may not immediately reduce your EMI

 

Existing borrowers should not assume that the revised MCLR will automatically change their EMI from September.

 

MCLR-linked loans have a reset date specified in the loan agreement. Depending on the loan, the interest rate may reset every month, quarter, six months or once a year. Therefore, the revised benchmark will affect a borrower only when the applicable reset takes place.

 

The final lending rate is also not necessarily equal to the MCLR. Banks can charge a spread over the benchmark, depending on the borrower and the terms of the loan.

 

For example, if a loan is linked to the one-year MCLR, a borrower needs to check whether the loan’s next annual reset falls after the latest revision. If the reset is still several months away, the September cut may not immediately affect the interest rate.

 

MCLR is different from the repo rate

 

MCLR should not be confused with the repo rate set by the Reserve Bank of India.

 

The RBI introduced MCLR in 2016 as an internal benchmark for banks to price certain loans based on their marginal cost of funds and other factors.

 

Repo-linked loans, on the other hand, are tied to an external benchmark. Changes in the RBI’s policy rate can therefore have a more direct bearing on loans linked to an external benchmark, subject to the spread and other terms.

 

This is why two borrowers with loans from the same bank can see different changes in their interest rates even when the bank revises its lending benchmarks.

 

HDFC Bank’s other lending rates

 

The latest MCLR revision is separate from HDFC Bank’s base rate and Benchmark Prime Lending Rate (BPLR).

 

The bank’s base rate stands at 8.70 per cent, effective June 24, 2026. Its BPLR is 17.20 per cent per annum, down from 17.30 per cent earlier.

 

These benchmarks apply to loans depending on the lending regime and terms under which they were sanctioned. A borrower should therefore first establish which benchmark applies to their loan before assessing the impact of the latest MCLR cut.

 

What should borrowers do?

 

For an existing borrower, the first step is to check the loan statement or loan agreement for the applicable benchmark and reset date.

 

Borrowers should:

 

Check whether the loan is linked to MCLR or another benchmark.

 

Find out the applicable MCLR tenure.

 

Check the next reset date.

 

Confirm the spread charged over the benchmark.

 

Ask the bank for the revised effective interest rate after the reset.

 

Compare the impact on EMI and remaining tenure.

 

Borrowers considering a balance transfer should also calculate the total cost of switching. Processing fees and other charges can reduce or even eliminate the benefit of a small reduction in the interest rate.