MCLR Rate
MCLR, full form Marginal Cost of Fund based Lending Rate is the internal benchmark rate used by banks to fix the interest rate on floating rate loans. Starting from 1st April 2016, all banks in India are required to benchmark and price their loans to MCLR.
6th August 2020 – RBI keeps Repo Rate unchanged at 4%
Current MCLR, Base Rate, PLR Trend of All Banks in India Sep 2020
| Bank MCLR, Past Trend | Current MCLR/ PLR Rate – 24th Sep 2020 | Base Rate | Latest Update |
|---|---|---|---|
| SBI MCLR Base Rate | 6.65% - 7.30% | 7.40% | 10th Sep 20 |
| HDFC PLR | 16.20% | - | 12th Jun 20 |
| ICICI Bank MCLR Base Rate | 7.15% - 7.40% | 8.85% | 01st Sep 20 |
| Axis Bank MCLR Base Rate | 7.30% - 7.65% | 9.15% | 18th Sep 20 |
| PNB Housing Finance PLR | 14.35% | - | 16th Apr 18 |
| ICICI Home Finance PLR | 17.70% | - | 03rd Apr 20 |
| LIC Housing Finance PLR | 14.70% | - | 01st Jan 20 |
| Bank of Baroda MCLR Base Rate | 6.70% - 7.55% | 8.15% | 12th Sep 20 |
| Citibank MCLR Base Rate | 6.20% - 6.55% | 5.35% | 07th Sep 20 |
| Indiabulls PLR | 24.00% | - | 01st Oct 18 |
| HDFC Bank MCLR Base Rate | 6.95% - 7.50% | 9.30% | 07th Sep 20 |
| IndusInd Bank MCLR Base Rate | 8.50% - 9.15% | 10.55% | 22nd Jul 20 |
| Kotak Bank MCLR Base Rate | 7.05% - 7.85% | 8.70% | 16th Sep 20 |
| Yes Bank MCLR Base Rate | 6.70% - 9.00% | 9.75% | 01st Sep 20 |
| RBL Bank MCLR Base Rate | 8.55% - 9.25% | 10.05% | 22nd Jul 20 |
| ESAF Small Finance Bank MCLR Base Rate | 14.11% - 14.47% | - | 17th Sep 20 |
| Jana Small Finance Bank MCLR Base Rate | 10.69% - 12.44% | - | 08th Aug 20 |
| Fincare Small Finance Bank MCLR Base Rate | 14.50% - 15.00% | - | 15th Aug 20 |
| Cholamandalam PLR | 15.00% | - | 14th Mar 19 |
| Piramal Housing Finance PLR | 16.05% | - | 05th May 19 |
| IDFC First Bank MCLR Base Rate | 8.65% - 9.60% | 9.50% | 08th Sep 20 |
| DBS Bank MCLR Base Rate | 6.50% - 7.00% | 7.00% | 07th Sep 20 |
| Bajaj Finserv PLR | 20.16% | - | 01st May 14 |
| United Bank of India MCLR Base Rate | 6.80% - 7.60% | 9.55% | 01st Sep 20 |
| Union Bank of India MCLR Base Rate | 6.75% - 7.40% | 9.20% | 11th Sep 20 |
| Jammu And Kashmir Bank MCLR Base Rate | 6.75% - 8.00% | 9.50% | 10th Sep 20 |
| Bandhan Bank MCLR Base Rate | 8.38% - 10.61% | 12.00% | 07th Sep 20 |
| UCO Bank MCLR Base Rate | 6.75% - 7.35% | 9.60% | 10th Sep 20 |
| Punjab and Sind Bank MCLR Base Rate | 7.10% - 7.75% | 9.70% | 16th Aug 20 |
| Central Bank of India MCLR Base Rate | 6.55% - 7.10% | 9.10% | 15th Sep 20 |
| Canara Bank MCLR Base Rate | 6.95% - 7.40% | 9.40% | 07th Sep 20 |
| Bank of Maharashtra MCLR Base Rate | 6.80% - 7.30% | 9.40% | 07th Sep 20 |
| LT Housing Finance PLR | 17.50% | - | 26th Apr 18 |
| Bank of India MCLR Base Rate | 6.75% - 7.85% | 9.00% | 01st Sep 20 |
| Andhra Bank MCLR Base Rate | 6.75% - 7.40% | 9.45% | 11th Sep 20 |
| Indian Overseas Bank MCLR Base Rate | 7.10% - 7.55% | 9.45% | 10th Sep 20 |
| HSBC Bank MCLR Base Rate | 7.20% - 7.50% | 8.30% | 01st Sep 20 |
| Standard Chartered Bank MCLR Base Rate | 7.00% - 9.40% | 8.85% | 07th Sep 20 |
| Edelweiss PLR | 17.50% | - | 30th Nov 15 |
| GIC Housing Finance PLR | 15.00% | - | 30th Nov -1 |
| IIFL PLR | 17.50% | - | 01st Apr 14 |
| Corporation Bank MCLR Base Rate | 6.75% - 7.40% | 9.65% | 11th Sep 20 |
| IDBI Bank MCLR Base Rate | 7.35% - 8.75% | 9.65% | 12th Sep 20 |
| Indian Bank MCLR Base Rate | 7.05% - 7.30% | 9.15% | 03rd Sep 20 |
| Allahabad Bank MCLR Base Rate | 7.05% - 7.30% | 9.15% | 03rd Sep 20 |
| OBC MCLR Base Rate | 6.80% - 7.60% | 9.50% | 01st Sep 20 |
| PNB MCLR Base Rate | 6.80% - 7.60% | 8.80% | 01st Sep 20 |
| Karur Vysya Bank MCLR Base Rate | 7.90% - 8.65% | 10.10% | 07th Sep 20 |
| Syndicate Bank MCLR Base Rate | 6.95% - 7.40% | 9.50% | 07th Sep 20 |
| DCB Bank MCLR Base Rate | 8.35% - 9.95% | 10.64% | 05th Sep 20 |
| Dhan Laxmi Bank MCLR Base Rate | 8.00% - 8.90% | 11.35% | 01st Sep 20 |
| Karnataka Bank MCLR Base Rate | 8.20% - 8.95% | 9.25% | 01st Sep 20 |
| South Indian Bank MCLR Base Rate | 7.85% - 8.25% | 9.85% | 20th Aug 20 |
| Federal Bank MCLR Base Rate | 7.85% - 8.10% | 9.63% | 16th Sep 20 |
| Lakshmi Vilas Bank MCLR Base Rate | 9.25% - 9.85% | 10.15% | 01st Sep 20 |
| Equitas Small Finance Bank MCLR Base Rate | 13.15% - 13.80% | - | 01st Sep 20 |
| AU Small Finance Bank MCLR Base Rate | 7.55% - 10.15% | - | 07th Sep 20 |
| Ujjivan Small Finance Bank MCLR Base Rate | 13.60% - 15.00% | - | 20th Aug 20 |
6th August 2020 – RBI keeps Repo Rate unchanged at 4%
RBI, in its bi-monthly monetary policy, has kept the repo rate unchanged to 4%. This has been done to limit the damage to the economy caused by the Covid-19 and subsequent lockdowns. Repo rate is the rate at which the central bank infuses liquidity in the banking system. The reverse repo rate also stands unchanged at 3.35%.
What is MCLR?
- MCLR is lending rate calculated based on cost of raising new funds for the bank which include the cost of maintaining CRR/SLR, operating costs of banks and tenor premium.
- As MCLR is closely linked to repo rate, it improves the transmission of RBI’s repo rate cut to the end borrower
- Banks publish MCLR for at least five durations which are overnight MCLR, 1 month MCLR, 3 month MCLR, 6 month MCLR and 1 year MCLR. However banks may publish MCLR base rates for more than five periods. The banks may revise the MCLR rate every month
- Interest rate on each floating rate loan would be reset on based on the duration of the MCLR to which it is linked
What is Base Rate?
- Base Rate is the lending rate calculated based on the total cost of funds of the banks and is the minimum interest rate at which a bank can lend except for loans to its own employees, its retired employees and against bank’s own deposits
- All floating and fixed rate loans sanctioned by banks before 1st April, 2016 were priced using base rate as benchmark
- If you check the MCLR and base rate of banks shown above, you will notice that MCLR rates are mostly 5 - 50 bps lower compared to base rate. The reason is that MCLR is based on cost of raising new funds and hence, any changes in repo rates results in changes in cost of borrowings of banks which gets transmitted to MCLR
- Starting from April 2018, RBI has mandated that banks’ base rates be linked to MCLR rates. This is expected to benefit home loan and loan against property borrowers whose loans are linked to base rate. Any increase or decrease in MCLR rates will now automatically be applicable to pre 2016 loans that are benchmarked to base rate.
PLR
- PLR (Prime Lending Rate) is the internal benchmark rate used for setting up the interest rate on floating rate loans sanctioned by Non Banking Financial Companies (NBFC) and Housing Finance Companies (HFC).
- PLR rate is calculated based on average cost of funds.
- NBFC and HFC generally price their loan at discount on their existing PLR.
Which loans are linked to MCLR rate?
Floating rate loans are linked to MCLR rate with effect from April 1st, 2016. Typically, home loan and loan against property schemes are floating rate loans and benchmarked to MCLR rates. Some banks offer fixed rate home loan and property loan under special schemes. Personal loan, business loan, car loan and gold loan are mostly fixed rate loans and are independent of MCLR rates.
| Type of Loan | Type of Rates | Interest Rate |
|---|---|---|
| Home Loan | Floating – MCLR Linked | 6.95% |
| Loan Against Property | Floating – MCLR Linked | 7.75% |
| Personal Loan | Fixed Rate | 10.45% |
| Business Loan | Fixed Rate | 13.50% |
| Gold Loan | Fixed Rate | 9.90% |
| Car Loan | Fixed Rate | 9.25% |
How does MCLR rate works?
Floating rate on your home loan is a function of two parameters; the reset frequency of the interest rate on your loan and spread on the benchmark. These two parameters together will determine the interest rate you will pay on your home loan, mortgage loan or business loan throughout the loan tenure:
- Reset Frequency:The applicable MCLR rate will be the rate corresponding to the interest rate reset frequency of the loan. So, a home loan with a reset frequency of every one year will be priced with the 1 year MCLR as the benchmark and a home loan with a 3 month reset will be price with the 3 month MCLR as the benchmark
- Spread:The next component is spread or the margin that you pay over the bank‘s MCLR for a particular loan type of the bank. The margin would be fixed at time of sanction and can be changed only if there is a significant change in customers’ credit profile. For instance, Bank A has 1 year MCLR of 9.1% and spread of 0.2 % for home loan. The interest rate that you will be charged in this case would be 9.3%.
- When a bank changes its MCLR, interest rate on your floating rate home loan will change accordingly. Banks typically adjust the change in floating rates, by changing the loan tenure and by keeping the EMI constant.
- For instance, if you have taken home loan rate at floating rate of 9% and after a year, your bank decides to lower down the MCLR by 50 bps. Hence, your home loan floating rate associated with MCLR rate will also come down to 50 bps at a rate of 8.50%. In most of the cases, the cut in home loan rate might not result in lower EMI, but your loan tenure will stand reduced.
What is the difference between MCLR and base rate?
Base rate of a bank is calculated based on the following factors -
- Average cost of funds
- Operating expenses
- Minimum rate of return i.e. profit
- Negative carry (loss in interest income) of keeping CRR/SLR
MCLR is calculated on the following factors-
- Marginal or incremental cost of funds which includes cost of raising new borrowings/deposits and minimum rate of return(profit)
- Negative carry on account of CRR
- Operating costs
- Calculated tenor wise based on cost of raising new funds for different tenors
Why MCLR loans are more transparent as compared base rate loans?
The above comparison shows that MCLR rate is more transparent and customer friendly as compared to base rate:
- MCLR is calculated based on the cost of raising new funds and also allows to have differential rates based on the underlying tenure of new funds.
- Cost of raising new funds for banks is closely linked to Repo Rate which makes MCLR rate more responsive to any changes in policy repo rates as compared to base rates.
- Further, MCLR of banks is revised every month as compared to base rate which is revised every quarter which makes MCLR more dynamic as compared to base rate.
