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Shobit Khurana made post

What is MCLR rate? What does it mean for my home loan?

Answer
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Swapnil Sarang answered.
2 years ago


Marginal Cost of Funds based Lending Rates, or MCLR, is the lowest interest rate that a bank or lender can offer to borrowers. This means lenders CANNOT offer home loan interest rates lower than the MCLR.

The central bank, Reserve Bank of India (RBI) had introduced the concept of MCLR with effect from April 1, 2016, due to limitations in the base rate regime. MCLR was introduced so that the end borrowers could enjoy the benefits associated with repo rate cuts by the RBI.

The RBI asked banks to link the base rate with MCLR for old home loans. Home loans that were taken before April 1, 2016, were based on base rate, which was arbitrarily decided by banks.

"Since MCLR is more sensitive to policy rate signals, it has been decided to harmonise the methodology of determining benchmark rates by linking the base rate to the MCLR with effect from April 1, 2018," the RBI said.

What it means for you

MCLR is closely linked with the repo rate and fund costs of the banks. If there is a change in the repo rate, then ideally, it should have an impact on your home loan’s floating rate of interest. If a bank transmits the rate cut to its customers, it will bring down the MCLR and hence, the floating rate of interest associated with your home loan will also come down.

It should be noted that lower MCLR will not affect your equated monthly instalments (EMIs), but the tenure of the loan will get impacted.

As MCLR is associated with floating rate home loans only, if you opt for a fixed-rate home loan, any change in the MCLR will not affect the home loan. Home loan interest rate is following a downward trend currently. So, you can benefit from switching to MCLR if you are planning to purchase a house.

<Table below>

Bank-wise MCLR rates: Tenure more than 1 year

Banks

3 years

2 years

1 year

State Bank of India

8.10%

8.05%

7.95%

HDFC Bank

8.40%

8.20%

8.10%

ICICI Bank

NA

NA

8.20%

Axis Bank

8.35%

8.30%

8.25%

PNB

830%

NA

8.15%

Citibank

NA

NA

8.10%

Indusind Bank

8.95%

8.90%

8.85%

Kotak

8.60%

8.60%

8.60%

Yes Bank

NA

NA

8.85%

RBL

9.40%

9.30%

9.25%

DBS

NA

NA

8.30%

IDFC

8.70%

8.60%

8.50%

Bank of India

NA

NA

8.30%

Andhra Bank

NA

NA

8.40%

Allahabad Bank

8.70%

8.65%

8.45%

Nainital Bank

9.00%

8.65%

8.35%

Lakshmi Vilas Bank

NA

NA

9.30%

Jammu and Kashmir Bank

9.05%

9.00%

8.80%

Bank of Maharashtra

NA

NA

8.65%

Canara Bank

NA

NA

8.45%

Central Bank of India

NA

NA

8.30%

Bandhan Bank

10.74%

10.61%

10.20%

United Bank of India

NA

NA

8.60%

Union Bank of India

8.30%

8.25%

8.20%

UCO Bank

NA

NA

8.45%

Punjab and Sind Bank

8.85%

8.85%

8.40%

Dena Bank

NA

NA

8.25%

Federal Bank

NA

NA

8.90%

South Indian Bank

NA

NA

9.00%

Standard Chartered

9.05%

8.90%

8.55%

Deutsche Bank

NA

NA

9.25%

BNP Paribas

8.25%

8.00%

8.00%

Corporation Bank

NA

NA

8.65%

Indian Bank

8.55%

NA

8.35%

Karnataka Bank

NA

NA

8.75%

Dhan Laxmi Bank

NA

NA

9.80%

DCB Bank

NA

NA

9.72%

City Union Bank

NA

NA

9.25%

IDBI Bank

8.70%

8.60%

8.55%

Syndicate Bank

NA

NA

8.45%

OBC

NA

NA

8.40%

Indian Overseas Bank

8.60%

8.50%

8.40%

Karur Vysya Bank

NA

NA

9.00%