HDFC Bank trims MCLR by up to 10 basis points from 7 September

HDFC Bank cut its Marginal Cost of Funds-based Lending Rate by 5 to 10 basis points across every published tenure, with the new grid in force from 7 September. The overnight and one-month rates both dropped to 7.90 percent from 8.00 percent. The three-month rate is 8.05 percent, down from 8.15. The six-month rate is 8.25 percent, down from 8.30. The one-year rate is 8.35 percent, down from 8.40. The two-year rate is 8.45 percent, down from 8.55. The three-year rate is 8.60 percent, down from 8.65.

The band as a whole now runs from 7.90 to 8.60 percent. In August it ran from 8.00 to 8.65 percent. A basis point is one-hundredth of a percentage point. The bank posted the figures on its website. They apply to loans that still use MCLR as the reference, not to the newer repo-linked external benchmark regime that has covered most fresh floating-rate retail loans since 2019.

Who actually feels a 5 or 10 basis-point cut

MCLR still prices a stock of older home, auto and business loans that were booked before the external benchmark rules took hold, and some corporate lines that never moved. Those contracts reset on an anniversary or at a stated interval. A borrower whose one-year MCLR reset falls after 7 September will see the new 8.35 percent as the base, plus whatever spread the sanction letter fixed. A borrower whose reset is months away will wait.

The cash effect is small on a single loan and large across a book. On a Rs 50 lakh home loan, 5 basis points is a few hundred rupees a month. On a bank-wide stock of MCLR loans it is a change in interest income. HDFC Bank is the largest private lender in the country. When it moves the grid, other banks are watched for a follow.

The cuts are not even. Overnight, one-month, three-month and two-year tenures fell 10 basis points. Six-month, one-year and three-year tenures fell 5. The one-year rate is the one most older retail borrowers still track. That is the smaller cut.

What the move says about funding costs

MCLR is built from the bank's marginal cost of funds, the operating cost, the negative carry on cash reserve and a tenor premium. A lower grid usually means the bank's own cost of deposits and wholesale funds has eased, or that it is willing to accept a thinner margin to hold borrowers. It does not mean the Reserve Bank has changed the repo rate on this date. It means HDFC Bank's internal arithmetic, as of 7 September, supports a slightly cheaper MCLR book.

Borrowers on the repo-linked external benchmark will not see this grid at all. Their rate moves when the RBI moves, plus or minus the bank's spread. The two populations now live on different clocks. The MCLR cut is news for the older clock.

For a household deciding whether to prepay, refinance or sit tight, the useful comparison is not 8.35 percent against 8.40 percent. It is 8.35 percent plus spread against the current external-benchmark offer at the same bank and against a prepayment charge, if any. A 5 basis-point cut rarely pays for a refinance on its own. It does reduce the cost of waiting for the next reset.

The published table is the whole story on 7 September. Overnight 7.90, one month 7.90, three months 8.05, six months 8.25, one year 8.35, two years 8.45, three years 8.60. That is the new floor under every HDFC Bank loan that still takes its cue from MCLR.