Key Highlights :
HDFC Bank lowered MCLR by 10 basis points for tenors expiring from June 7, 2025.
Home loan customers who have MCLR-based home loans will gain by paying lower EMIs or prepaying the loan in shorter tenure according to reset schedules.
Key Background :
MCLR is a benchmark rate of interest, which is aligned with the cost of funds, and fixed by banks to stabilize interest on different loans. MCLR has been launched in 2016 with an aim that lending should be more transparent and there should be faster transmission of the policy rate change to lenders. Interest rates on loans based on MCLR are re-priced at regular intervals depending on the frequency, like quarterly, half-yearly, or yearly.
The Reserve Bank of India has taken quite substantial monetary easing measures during 2025, such as reducing the repo rate by an aggregate of 100 basis points. The logic for having done this is to inject liquidity into the financial market and spur the economy, particularly the infrastructure and housing sector. Banks have been instructed to transmit the advantage of these reductions to consumers to underpin demand for credit.
This is followed by HDFC Bank’s cut in its MCLR, a significant attempt to implement these policy shifts in its lending policy. The cut across all tenors—from overnight to three-year loans—is good for the masses, and especially for homebuyers, as housing finance accounts for a large chunk of lending on MCLR basis.
For the borrowers, it will largely be a question of when their next interest rate reset is. Borrowers with their reset coming up in the near term for their loans in the near term will benefit directly from lower interest rates, so they will have lower EMIs or pay off the loan early. In the long run, this move can heavily reduce the overall interest burden, thus more personal financial security for the borrowers.
The action also reflects HDFC Bank’s aggressive approach in the housing finance business. By becoming the first of the large lenders to react to a rate cut after RBI policy, the bank reaffirms its reaction to economy trends and its effort to create value for customers. The cutting of lending rates is a tactical move that forms part of a broader push to improve the affordability and availability of housing within a recovery economy.
