HDFC Bank, India's largest lender by market capitalization, has announced a reduction in its Marginal Cost of Funds-based Lending Rates (MCLR) by 5 basis points across several tenures. These revised rates officially came into effect on July 7, 2026. This adjustment holds particular significance for borrowers whose home, personal, or car loans are still pegged to the MCLR framework.
New Rates and Affected Tenures
The bank has lowered its MCLR for overnight, one-month, three-month, and six-month tenures by 5 basis points. Following this revision, the interest rates for both the overnight and one-month tenures now stand at 8.05% each. It is important to note, however, that the Indian banking sector has largely moved toward external benchmark lending rates, which are directly tied to the RBI policy repo rate. Since HDFC Bank has not altered its external benchmark rates, only a specific segment of borrowers will see their interest costs change.
The Transition from MCLR to Repo-Linked Rates
The Reserve Bank of India (RBI) introduced the MCLR on April 1, 2016, as an internal benchmark for pricing all floating-rate rupee loans. However, to ensure more effective transmission of monetary policy, the central bank mandated a shift to external benchmarks starting October 1, 2019, which effectively linked retail loans to the repo rate. Existing credit limits and loans previously linked to MCLR, Base Rate, or BPLR are permitted to continue under those frameworks until the time of repayment or renewal.
Current Home Loan Interest Rate Structure
At present, HDFC Bank offers home loan interest rates ranging from 7.75% to 13.20% for both salaried and self-employed applicants. These rates are calculated based on the policy repo rate, which is currently fixed at 5.25%. The final interest rate is determined by adding a spread of 2.50% to 7.95% to the repo rate. In mathematical terms, this means 5.25% (repo rate) + 2.50% to 7.95% (spread) results in the final range of 7.75% to 13.20%.
Key Factors Influencing Your Interest Rate
According to HDFC Bank, several critical variables influence the interest rate offered to a borrower. Your credit score is perhaps the most significant factor, as a higher score indicates greater creditworthiness and often leads to more competitive rates. The total loan amount and the loan-to-value ratio also play a role, as lower borrowing ratios can attract better deals. Furthermore, the choice between fixed and floating interest rates, the stability of your income and employment history, and the broader macroeconomic climate within India significantly dictate the final terms of the loan.
How EMI Calculation Works
Equated Monthly Installments (EMI) consist of both the principal repayment and the interest charges on your outstanding loan balance. As noted on the HDFC Bank website, opting for a longer tenure, which can extend up to 30 years, helps to lower the individual monthly payment. The interest rate is applied monthly to the outstanding principal. To illustrate, if a borrower takes a loan of ₹10,00,000 at an annual interest rate of 7.2% for a term of 120 months (10 years), the EMI is calculated using the formula: ₹10,00,000 * 0.006 * (1 + 0.006)^120 / ((1 + 0.006)^120 - 1), resulting in a monthly payment of ₹11,714.
