Policy rates have been increased by the RBI (Reserve Bank of India) to the tune of 25 basis points. HDFC Bank has now hiked its MCLR (Marginal Cost of Funds Based Lending Rate) by 10 basis points for various tenors. The new rates of interest will apply from the 7th of June, 2018 as per reports.
8.40% will be the rate of interest for 1 year while this will be 8.55% and 8.70% for 2 and 3 year tenors respectively. Home and automobile loans will automatically get costlier with this latest increase in MCLR rates at HDFC Bank. The RBI hiked the repo rate sometime earlier after a major gap of 4 years. The increase in this policy rate will automatically spur more lenders to hike their lending rates.
SBI (State Bank of India) has also hiked its MCLR rate to the tune of 10 basis points. The MCLR is 8.25% for 1 year and for 2 years it stands at 8.35%. Banks and other lenders usually have MCLR rates which are overnight, 1 month, 3 months, 6 months and 1 year. These rates have to be mandatorily declared by these lenders each month. However, the revisions on home loan interest rates are only applicable post the reset period.
MCLR encompasses incremental cost of funds while the base rate was earlier worked out depending on the average cost of funds. From the 1st of April, 2018, home loans were linked with the MCLR and old loans are now de-linked from the base rate method as well.