HDFC Bank reduced its MCLR by 0.05% on select tenures, meaning home loan and other loan EMIs will become slightly cheaper starting Jan 7, 2026. The MCLR now ranges between 8.25% and 8.55%, depending on the loan type and tenure. Previous range was 8.35%–8.60% (depending on tenure). The impact is small but positive for borrowers.
Why it matters?
Loans like home loans, personal loans, and car loans in India often have interest rates linked to MCLR. So, if MCLR decreases, the interest rate on these loans may also decrease, reducing the EMI (Equated Monthly Installment). Here if any individual have a loan linked to HDFC’s MCLR, EMIs will reduce but the effect will be small as the cut is only 0.05%.
Suppose an individual have a home loan of ₹50 lakh at an interest rate of 8.30% linked to 1-year MCLR, for 20 years.
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Old EMI: ₹41,000 (approx.)
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New EMI after 0.05% cut: ₹40,950 (approx.)
Monthly savings are around ₹50, but over a year, it adds up to ₹600. So even a small reduction in MCLR saves money every month, which adds up over the year.
Why banks cut MCLR?
Banks typically reduce their MCLR when their cost of funds decreases. This can happen if the Reserve Bank of India (RBI) lowers repo rates or if the bank is able to raise deposits at a lower cost. By cutting the MCLR, banks pass on these savings to borrowers in the form of lower interest rates, while also staying competitive in the lending market.
Other reference rates used by banks include the Base Rate and the BPLR (Benchmark Prime Lending Rate). Currently, the Base Rate stands at 8.90% and serves as an alternative benchmark for loans. The BPLR, on the other hand, is 17.40%, but it is less relevant for most borrowers today.
