Loan borrowers alert! Be prepared to pay more EMI as HDFC Bank hikes lending rates

New Delhi: HDFC Bank, India's largest private sector lender, has raised its marginal-cost based lending rate (MCLR) by 35 basis points across the board (bps). The bank's rate hike comes ahead of widespread anticipation that the Reserve Bank of India (RBI) will raise interest rates sharply tomorrow.

After the recent rate hike, the overnight MCLR at HDFC Bank is 7.50 percent, while the one-month MCLR is 7.55 percent, according to the bank's website. The three-month and six-month MCLRs are both 7.60 percent and 7.70 percent.

The one-year MCLR, which is connected to many consumer loans, will now be 7.85 percent, the two-year MCLR will be 7.95 percent, and the three-year MCLR will be 8.05 percent. According to HDFC Bank's website, these new rates will take effect on Tuesday, June 7, 2022. The increase in HDFC Bank's lending rate will increase the cost of EMIs on house and other loans that are dependent on its marginal cost of funds.

HDFC Bank's tenor-wise MCLRs:

Overnight - 7.50%

1 month - 7.55%

3 month - 7.60%

6 month - 7.70%

1 year - 7.85%

2 year - 7.95%

3 year - 8.05%

MCLR rates have also been raised by several other banks, including State Bank of India (SBI), Bank of Baroda, Axis Bank, and Kotak Mahindra Bank.

Following the RBI's surprising action last month to raise the benchmark lending rate by 40 basis points (bps) to 4.40 percent in an off-cycle hike, which was the first increase in borrowing rates since August 2018, banks have been announcing increases in their lending rates. The monetary policy committee (MPC), chaired by RBI Governor Shaktikanta Das, is expected to raise the repo rate again in the approaching policy sessions.

Inflation exceeding the upper bound of 6% caused the central bank to boost rates in an unexpected meeting. In April, India's retail inflation surged to an eight-year high, staying beyond the central bank's tolerance limit for the fourth month in a row, and is expected to continue high.