HDFC Bank’s loans become costlier:Lender hikes interest rates on auto, personal and home loans

Private sector lender HDFC Bank has increased the Marginal Cost of funds-based Lending Rate (MCLR) by up to 10 basis points (0.10% rate of interest) across tenors effective June 8, 2026. The maximum hike of 10 basis points was for loans having a maturity of two years to 8.55% from the earlier 8.45%. Minimum RoI on auto, personal home loans: The benchmark one-year MCLR has been revised up by 5 basis points to 8.40%, as per the data available on the HDFC Bank website. The one-year rate is used to fix most consumer loans, such as auto, personal and home loans. The overnight, three-month, six-month and three-year tenor MCLRs have been raised by 5 basis points to 8.10%, 8.20%, 8.35% and 8.65%, respectively. The MCLR hike decision comes days after the Reserve Bank on Friday expectedly kept the repo rate unchanged during the recently held Monetary Policy Committee (MPC) meeting. How RBI’s repo rate influences banks’ loan interest rates? Any central bank has a powerful tool in the form of policy rate to fight inflation. When inflation is very high, the central bank tries to reduce money flow in the economy by increasing the policy rate. If the policy rate is higher, the loans that banks receive from the central bank will be expensive. In turn, banks make loans expensive for their customers. This reduces money flow in the economy. When money flow decreases, demand falls and inflation comes down. Similarly, when the economy goes through a bad phase, there is a need to increase money flow for recovery. In such cases, the central bank reduces the policy rate. This makes loans from the central bank to banks cheaper and customers also get loans at cheaper rates.