HDFC Bank Cuts MCLR by Up to 10 bps: How It May Affect Your Loan EMI

HDFC Bank is reducing its Marginal Cost of Funds Linked Lending Rate by up to 10 basis points on all seven tenors that it publishes. Those borrowers who have borrowed against any of these tenors may see reduction in their cost of borrowing, but not all of them right away. 

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The new rates took effect on September 7, 2026. The bank's MCLR band now runs from 7.90% to 8.60%, compared with 8% to 8.65% in August. 

The revised rates, tenure by tenure 

Reductions range from 5 bps to 10 bps: 

• Overnight: 7.90%, down from 8% (10 bps) 
• One month: 7.90%, down from 8% (10 bps) 
• Three months: 8.05%, down from 8.15% (10 bps) 
• Six months: 8.25%, down from 8.30% (5 bps) 
• One year: 8.35%, down from 8.40% (5 bps) 
• Two years: 8.45%, down from 8.55% (10 bps) 
• Three years: 8.60%, down from 8.65% (5 bps) 

One basis point is equal to one-hundredth of one percentage point; thus a cut of 10 basis points is equivalent to a reduction of 0.10 percentage point, and a cut of 5 basis points equals a reduction of 0.05 percentage point. 

While the overnight rate and one-month rate at 7.90% each are the lowest among the seven, the three-year MCLR at 8.60% is the highest. 

Why your EMI may not change this month 

A lower MCLR does not automatically translate into a lower equated monthly instalment from September. Three things determine what actually happens to a given loan: the benchmark it is linked to, how often that benchmark resets, and the spread the bank charges on top. 

Every MCLR-linked loan carries a reset date written into the loan agreement. Depending on the product, the rate may reset monthly, quarterly, every six months or once a year. The revised benchmark only reaches the borrower when that reset falls due. 

The rate the borrower pays is also not the MCLR itself. Banks add a spread over the benchmark, set according to the borrower's profile and the loan terms. 

Take a loan tied to the one-year MCLR. The borrower needs to check when the next annual reset is scheduled. If it is still several months off, the September cut will not alter the interest rate until then. 

MCLR is not the repo rate 

The two are often confused, but they work differently. The Reserve Bank of India introduced MCLR in 2016 as an internal benchmark that lets banks price certain loans off their marginal cost of funds and related factors. 

Repo-linked loans are tied to an external benchmark instead. A change in the RBI's policy rate therefore flows through more directly to those loans, subject again to the spread and other terms. This is why two customers of the same bank can see their interest rates move differently after a benchmark revision. 

HDFC Bank's other lending rates 

The MCLR change is separate from the bank's base rate and its Benchmark Prime Lending Rate. The base rate will be applicable at the level of 8.70% starting June 24, 2026. BPLR will be at 17.20% annually compared to the previous 17.30%. 

Whether the above-mentioned benchmark is applicable to a certain loan is determined by the kind of lending policy followed along with the terms of sanctioning of the said loan. 

What borrowers should do 

For an existing customer, the starting point is the loan statement or agreement, which will show the applicable benchmark and the reset date. From there: 

• Confirm whether the loan is linked to MCLR or another benchmark 
• Identify the MCLR tenure that applies 
• Note the next reset date 
• Check the spread charged over the benchmark 
• Ask the bank for the revised effective rate after the reset 
• Work out the effect on both the EMI and the remaining tenure 

Anyone weighing a balance transfer to another lender should also add up the full cost of moving. Processing fees and other charges can shrink, or wipe out entirely, the gain from a small reduction in the interest rate.