Latest news with #MCLR-linked
Time of India
12-05-2025
- Business
- Time of India
Rate transmission uneven despite liquidity comfort
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Mumbai: Banks appear to have largely looked through improving system liquidity and policy rate cuts while reducing the cost of borrowing for those taking loans tied to the lenders' internal benchmarks. Rates have reduced by only 5-15 bps for existing borrowers on loans tied to marginal cost of funds-based lending rate, even as liqudity turned into a surplus, and the central bank cumulatively cut policy rates by half a percentage point since February."I think the market rates will remain dynamic for some time before they settle," Amitabh Chaudhry, MD, Axis Bank , had said during the earnings call. "It was something similar when the rate started going up. You will see something similar when the rates are going down. So, it is pretty much a part of the normal playout of this activity over the next couple of quarters." In response to the cumulative 250 basis point rate increase during the last tightening cycle, between May 2022 and September 2024, the one-year median MCLR rose 170 basis weighted average lending rate on fresh and outstanding rupee loans increased 186 basis points and 116 basis points, respectively, during this period. Last week, several major banks made modest adjustments to their lending rates. HDFC Bank , India's most-valued lender, reduced its one-year MCLR by 15 bps, from 9.30% to 9.15%. Liquidity in system has improved since April. Daily average surplus liquidity stood at ₹1.4 lakh crore in April and ₹1.3 lakh crore as of May 8. March saw an average daily deficit of ₹1.23 lakh WALR on outstanding rupee loans declined by 10 bps as of March. In case of fresh loans, it has increased reflecting the significant proportion of MCLR-linked loans in it, given the longer reset period, it may undergo adjustments with some lag, experts say."Uneven pace of rate transmission is due to mix of credit portfolios across fixed and floating rate structures, and varied spreads by banks," said Aastha Gudwani, India chief economist at Barclays.
Time of India
07-05-2025
- Business
- Time of India
HDFC Bank cuts these lending rates by up to 15 bps; check details
Live Events How does MCLR affect borrowers? Latest HDFC Bank lending rates Effective Date: May 07, 2025 Tenor MCLR Overnight 9.00% 1 Month 9.00% 3 Month 9.05% 6 Month 9.15% 1 Year 9.15% 2 Year 9.20% 3 Year 9.20% HDFC Bank has announced a reduction in its Marginal Cost of Funds-based Lending Rates (MCLR), which will benefit borrowers whose loans are linked to this benchmark. The bank has lowered the MCLR by up to 15 basis points (bps) on select loan tenures. A basis point is one-hundredth of a percentage point, so a 15 bps cut translates to a 0.15% decrease in interest this revision, HDFC Bank's MCLR now ranges from 9.00% to 9.20%, depending on the loan tenure. This is a decrease from the previous range of 9.10% to 9.35%, which was applicable during April 2025. The revised MCLR rates have come into effect from May 7, read: Personal loan interest rates May 2025: Which bank is offering the lowest interest rate? This move by HDFC Bank comes in the wake of the Reserve Bank of India (RBI) reducing the repo rate by 25 bps in April, bringing the total cut to 50 bps since February 2025. The repo rate is the rate at which the RBI lends money to commercial banks, and a reduction in this rate typically leads to lower borrowing costs across the banking sector. As a result, several banks, including HDFC Bank, have started to pass on the benefits of lower funding costs to customers by reducing lending with MCLR-linked loans—such as home loans—may see a reduction in their EMIs (equated monthly installments) or a shorter loan tenure, depending on their loan terms and reset read: Cheaper home loan from Bank of Baroda: Lowest rate starts from 8% for these borrowers The MCLR is a benchmark rate used by banks to determine interest rates on various floating-rate loans, including home loans, personal loans, and auto loans. A decrease in MCLR translates to a potential drop in loan EMIs or a shorter loan tenure, benefiting borrowers in the long term. This will impact whether borrowers have chosen if it's a fixed loan or a floating rate bank has reduced the overnight and one-month MCLR tenures by 10 bps, from 9.10% to 9%. The three-month MCLR has been cut from 9.20% to 9.05%, down by 15 bps and the six-month MCLR has been reduced from 9.30% to 9.10%. The one-year MCLR rates have been reduced from 9.30% to 9.15%, down by 15 bps. The two year- MCLR is reduced by 10 bps from 9.30% to 9.20%. The three-year MCLR has been reduced from 9.35% to 9.20%.What is MCLR?The Marginal Cost of the Fund-Based Lending Rate or the MCLR is the minimum interest rate a financial institution needs to charge for a specific loan. It dictates the lower limit of the interest rate for a loan. This rate limit is set in stone for borrowers unless specified otherwise by the Reserve Bank of India. The RBI introduced the MCLR in 2016.
Time of India
30-04-2025
- Business
- Time of India
Large section of bank loan borrowers yet to gain from RBI rate cuts
Despite the RBI's 50 bps repo rate cut and liquidity infusion, a significant portion of borrowers haven't benefited due to reliance on MCLR-linked loans. MCLR remained unchanged at 9% in April, particularly affecting public sector borrowers. Banks' deposit costs and competition for funds are hindering faster transmission of rate cuts, impacting net interest margins. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads A large section of bank loan borrowers is yet to see the benefit from the Reserve Bank of India's two consecutive policy rate released by the RBI Wednesday showed that one-year median marginal cost of fund-based lending rate (MCLR) remained unchanged at 9% in April. MCLR has been at 9% since November, except February when it rose to 9.05%, the data central bank has reduced policy repo rate by a total of 50 basis points since February. It has also infused liquidity to the tune of Rs6.5 lakh crore in the banking system to ensure effective transmission of policy rate cuts into both lending and deposit latest RBI data showed that sections of existing borrowers may not have benefited in the form of reduction in their EMIs. This is because nearly 36% of all floating rate loans are priced on MCLR, while over 60% are on external benchmarks (EBLR) like repo rate. In the case of the public sector, the share of MCLR loans is at 51%, while it is just 13% for private weighted average lending rate (WALR) on fresh rupee loans as well as outstanding loans of banks fell month-on-month by 5 bps and 3 bps, respectively, to 9.35% and 9.77% in March, the data reflects loans priced to external benchmarks as well as those linked to banks' marginal cost of transmission of regulatory rate cuts happens quickly in case of repo-linked benchmark rate. The transmission in case of MCLR-linked rates, which depend on banks' deposit costs, takes a longer time of at least two quarters for the effect to play out, industry executives released Wednesday by the RBI showed that the weighted average domestic term deposit rate on fresh deposits of banks rose to 6.65% in March from 6.49% a month ago. On the outstanding deposits, the rate rose slightly to 7.03% from 7.02% in said that banking system liquidity was in deficit for a large part of March. This along with intense competition to raise liabilities, kept fixed deposit rates conditions eased from late March, which in turn prompted banks to reduce rates on term deposits. A few large banks have also reduced savings deposit rates in a bid to protect their net interest margins (NIMs).According to CRISIL Ratings, the extent of reduction in NIMs will therefore depend on the ability of banks to manage their deposit costs. But given the competition for deposits seen of late, that ability will be to CRISIL Ratings, any reduction in term deposit (TD) rates will apply only to incremental deposits and renewals, resulting in a slower transmission of the reduction to the liability side. Data shows only ~21% of TDs are maturing in a year, which means the rest will be due for repricing only after this fiscal.
