What is MCLR?
Marginal cost of fund-based lending (MCLR) is an appropriate reference rate set by the Reserve Bank of India ( RBI) for banks. MCLR 's rise was a huge loss to common man. The rise in MCLR makes borrowing costlier and costs more than previous instalments. The loan instalment also decreases if the MCLR rate dropped. MCLR is used to describe the minimum interest rate that a bank will charge borrowers on the loans this offers – whether they are large home loans, car loans , small personal loans, instant loans, and secured and unsecured loans. The bank will be able to lend at a lower rate with the MCLR coming down, making it cheaper to take home loans or car loans. But this advantage will be available for new customers who have taken out loans after April 2016 . Since the minimum lending rate was set prior to that.
SBI Cuts MCLR by 5 to 10 BPS :
State Bank of India or SBI, the country's biggest asset lender, announced a reduction in its benchmark lending rates across shorter tenors on Wednesday. The bank said that its marginal loan-based cost (MCLR) would be decreased by 5-10 basis points, and the new rates would come into effect on July 10.
According to SBI 's announcement, the MCLR will be reduced to 6.65 per cent for the three-month tenor from July 10.
Ideally, a lower MCLR means that the EMI or the loan period will see a decline and the borrower's home loan rates will become cheaper.
That impact isn't immediate though. There is a reset-period for home loans dependent on MCLR, during which the borrower must have the rates updated. SBI usually provides a one year rest period for loans centered on MCLR. This means that, for lenders, SBI would have to repay interest rates on loans after 1 year to pass on any modifications in the external benchmark rate.
The effectual interest rate on home loans also relies on the amount of the loan, tenure and other factors.
HDFC cuts MCLR by 20 BPS:
HDFC Bank, the largest private-sector bank in the country, cut its marginal-cost-based lending rate (MCLR) by 20 basis points ( bps) on loans by all tenors. According to its official website, the rate cut is applicable from Tuesday, that is July 7 , 2020. HDFC Bank, too, cut its MCLR by 5 bps over tenors last month.
After the new rate cut, its overnight MCLR is reduced to 7.10%, while the one-month MCLR is 7.15%, as per the HDFC Bank official website. One-year MCLR, which is related to many of the consumer loans, will now be 7.45 %, whereas three-year MCLR is set at 7.65 %. Banks typically check their MCLR monthly.
Latest HDFC Bank's tenor-wise MCLRs:
|
Tenor wise MCLR in |
MCLR (June 2020 in%) |
MCLR (July 2020 in%) |
|
Overnight |
7.30 |
7.10 |
|
1 Month |
7.35 |
7.15 |
|
3 Month |
7.40 |
7.20 |
|
6 Month |
7.50 |
7.30 |
|
1 Year |
7.65 |
7.45 |
|
3 Year |
7.75 |
7.55 |
|
6 Year |
7.85 |
7.65 |
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