HDFC Bank reduces MCLR by 5 basis points, sparking limited relief for borrowers

HDFC Bank has lowered its marginal cost of funds-based lending rate (MCLR) across most tenures by 5 basis points, potentially easing borrowing costs for some clients from August 7, 2026. However, the impact on loans varies depending on the benchmark linked to individual loans, with many not seeing immediate benefits.

HDFC Bank has trimmed its marginal cost of funds-based lending rate, or MCLR, by 5 basis points across most tenures, a move that could modestly ease borrowing costs for some customers from August 7, 2026. The bank left its two-year benchmark unchanged but lowered rates on the overnight, one-month, three-month, six-month, one-year and three-year tenures, taking the range to 8% to 8.65%. Business Standard said the change follows a period in which HDFC Bank has continued to adjust its lending benchmarks in line with funding conditions, while other reports have shown the bank has made several shifts to MCLR settings over recent months.

The key point for borrowers is that a lower MCLR does not automatically mean a cheaper home loan or personal loan. Most newer floating-rate retail loans are linked to external benchmarks, such as the Reserve Bank of India’s repo rate, rather than to MCLR, so they may not move at all after this revision. Only borrowers whose loans are still tied to MCLR are likely to see any benefit, and even then the actual rate depends on the spread built into the loan agreement as well as the next reset date. The bank’s latest adjustment also comes after earlier MCLR changes reported by LiveMint and Financial Express in May and June, underscoring how often these lending benchmarks can move.

For existing MCLR-linked borrowers, the change may filter through only when the loan resets, which is why two customers with similar loans may not see relief at the same time. RBI rules require MCLR-linked floating-rate loans to have a reset period of one year or less, while external benchmark-linked loans must be reset at least every three months. That makes it important for borrowers to check the benchmark used, the spread charged over it and the next reset date before assuming the bank’s cut will reduce their EMI.

Borrowers thinking about switching should compare their effective rate with what is available on new loans and factor in processing fees, conversion charges and other costs. For many households, a 5 basis point cut will be too small on its own to justify moving, but it may still offer some relief to customers already tied to MCLR. The bigger issue is whether their loan is linked to an older internal benchmark or a newer external one, because that determines how quickly any rate move reaches the monthly repayment.