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.

4th October 2019 – RBI cuts repo rate by 25 bps to 5.15%

Current MCLR, Base Rate, PLR Trend of All Banks in India Oct 2019

Bank MCLR, Past Trend	Current MCLR/ PLR Rate – 14th Oct 2019	Base Rate	Latest Update
SBI MCLR Base Rate	7.70% - 8.25%	8.95%	10th Oct 19
HDFC PLR	16.75%	-	01st Aug 19
ICICI Bank MCLR Base Rate	8.20% - 8.45%	8.85%	01st Oct 19
Axis Bank MCLR Base Rate	8.10% - 8.60%	9.40%	18th Sep 19
PNB Housing Finance PLR	14.35%	-	16th Apr 18
LIC Housing Finance PLR	14.70%	-	24th Jan 19
Bank of Baroda MCLR Base Rate	7.95% - 8.35%	9.40%	07th Oct 19
Citibank MCLR Base Rate	8.00% - 8.30%	8.45%	07th Oct 19
Indiabulls PLR	23.00%	-	05th Apr 18
HDFC Bank MCLR Base Rate	7.95% - 8.60%	9.30%	07th Oct 19
IndusInd Bank MCLR Base Rate	9.00% - 9.65%	10.55%	22nd Sep 19
Kotak Bank MCLR Base Rate	8.25% - 8.80%	9.20%	16th Sep 19
Yes Bank MCLR Base Rate	8.00% - 9.70%	10.25%	01st Oct 19
RBL Bank MCLR Base Rate	9.15% - 9.95%	10.15%	22nd Sep 19
Cholamandalam PLR	10.00%	-	01st Jun 18
IDFC First Bank MCLR Base Rate	8.85% - 9.55%	9.50%	09th Sep 19
Piramal Housing Finance PLR	16.05%	-	05th May 19
DBS Bank MCLR Base Rate	8.00% - 8.30%	8.40%	07th Oct 19
Bajaj Finserv PLR	20.16%	-	01st May 14
South Indian Bank MCLR Base Rate	8.55% - 9.25%	10.00%	20th Sep 19
Edelweiss PLR	17.50%	-	30th Nov 15
LT Housing Finance PLR	17.35%	-	01st Jan 70
OBC MCLR Base Rate	7.85% - 8.35%	9.50%	10th Oct 19
PNB MCLR Base Rate	7.85% - 8.45%	9.25%	01st Oct 19
Bank of Maharashtra MCLR Base Rate	8.15% - 8.50%	9.50%	07th Sep 19
Punjab and Sind Bank MCLR Base Rate	8.10% - 9.30%	9.70%	16th Sep 19
Bank of India MCLR Base Rate	8.10% - 8.35%	9.45%	10th Sep 19
Bandhan Bank MCLR Base Rate	9.67% - 10.78%	12.00%	07th Sep 19
Canara Bank MCLR Base Rate	8.15% - 8.40%	9.40%	07th Oct 19
Standard Chartered Bank MCLR Base Rate	8.30% - 9.85%	9.45%	10th Sep 19
Syndicate Bank MCLR Base Rate	7.90% - 8.35%	9.50%	13th Sep 19
UCO Bank MCLR Base Rate	7.85% - 8.45%	9.60%	10th Sep 19
Union Bank of India MCLR Base Rate	7.95% - 8.55%	9.00%	01st Sep 19
United Bank of India MCLR Base Rate	8.00% - 8.70%	9.90%	17th Jul 19
Andhra Bank MCLR Base Rate	7.90% - 8.40%	9.55%	16th Sep 19
Allahabad Bank MCLR Base Rate	7.90% - 8.40%	9.15%	14th Aug 19
Central Bank of India MCLR Base Rate	7.75% - 8.25%	9.60%	15th Sep 19
Federal Bank MCLR Base Rate	8.55% - 9.00%	9.63%	17th Sep 19
GIC Housing Finance PLR	15.00%	-	30th Nov -1
DHFL PLR	19.42%	-	16th Apr 19
Dhan Laxmi Bank MCLR Base Rate	8.50% - 9.80%	11.35%	01st Oct 19
HSBC Bank MCLR Base Rate	8.10% - 8.45%	8.90%	01st Oct 19
DCB Bank MCLR Base Rate	9.00% - 10.65%	10.64%	05th Aug 19
IDBI Bank MCLR Base Rate	7.85% - 9.10%	9.65%	12th Sep 19
IIFL PLR	17.50%	-	01st Apr 14
Indian Bank MCLR Base Rate	7.95% - 8.35%	9.45%	03rd Oct 19
Indian Overseas Bank MCLR Base Rate	8.05% - 8.70%	9.45%	10th Oct 19
Corporation Bank MCLR Base Rate	7.90% - 8.65%	9.65%	15th Sep 19
Jammu And Kashmir Bank MCLR Base Rate	7.85% - 9.20%	9.50%	10th Sep 19
Karnataka Bank MCLR Base Rate	8.50% - 9.25%	10.55%	01st Oct 19
Karur Vysya Bank MCLR Base Rate	8.35% - 9.45%	10.10%	07th Sep 19
Lakshmi Vilas Bank MCLR Base Rate	9.70% - 9.95%	10.15%	01st Oct 19
Equitas Small Finance Bank MCLR Base Rate	14.00% - 15.05%	-	01st Oct 19
AU Small Finance Bank MCLR Base Rate	9.30% - 12.10%	-	07th Sep 19
Ujjivan MCLR Base Rate	15.20% - 15.70%	-	20th Feb 19

4th October 2019 – RBI cuts repo rate by 25 bps to 5.15%

Repo Rate has been cut by 25 bps by RBI from 5.40% to 5.15% in its 4th bi-monthly monetary policy on 4th October 2019. Repo Rate has been cut 5th time in a row and is at the lowest in the last 9 years. This rate cut should bring in good news for home loan and mortgage loan borrowers, as the banks are expected to reduce their MCLRs, which should result in lower interest rates both for new and existing borrowers.

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	8.10%
Loan Against Property	Floating – MCLR Linked	8.70%
Personal Loan	Fixed Rate	10.50%
Business Loan	Fixed Rate	13.50%
Gold Loan	Fixed Rate	10.50%
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.