Major Banks Trim MCLR Rates, Hinting at Possible EMI Relief for Borrowers

Several major lenders have trimmed their Marginal Cost of Funds-based Lending Rates (MCLR) this month, raising hopes of lower home and personal loan EMIs for borrowers. HDFC Bank, PNB, Bank of Baroda, IOB, and BOI reduced their MCLR rates by 5-15 basis points across various tenures. Borrowers on MCLR-linked loans may see a reduction in EMIs from their next reset date. Those with older loans may consider moving to EBLR-linked loans for faster transmission of future rate cuts, but should compare the conversion cost before switching.

Several major lenders have trimmed their Marginal Cost of Funds-based Lending Rates (MCLR) this month, raising hopes of lower home and personal loan EMIs for borrowers. HDFC Bank, PNB, Bank of Baroda, IOB, and BOI reduced their MCLR rates by 5-15 basis points across various tenures. Borrowers on MCLR-linked loans may see a reduction in EMIs from their next reset date. Those with older loans may consider moving to EBLR-linked loans for faster transmission of future rate cuts, but should compare the conversion cost before switching.

HDFC Bank, for instance, reduced its six-month and one-year MCLR rates by 5 bps each, while Bank of Baroda cut its overnight and three-month MCLR rates by 10 and 15 bps, respectively. Indian Overseas Bank also lowered its overnight MCLR by 5 bps, along with cuts for longer tenors. These reductions are expected to benefit borrowers with loans reset every three or six months.

While these cuts are welcome news for existing borrowers, it's important to note that the benefits will only be realized at the next reset date. Borrowers should check their loan agreements to determine their reset dates and plan accordingly. Those with older loans might also consider switching to External Benchmark Lending Rate (EBLR)-linked loans, which tend to transmit rate changes more quickly. However, they should weigh the conversion costs before making the switch.