In an effort to control inflation, reserve Bank of India (RBI) has increased the repo rate by 90 basis points in the last two months. As a result, banks have started increasing their lending rates, affecting both new and existing borrowers, who will now have to pay higher EMIs.

In July, top banks in India like

and, their marginal cost of funds based lending rate increased (MCLR) in different periods.

Here is a comparison of MCLR on HDFC Bank and ICICI Bank loans post July hike.

State Bank Of India MCLR

State Bank of India has increased its marginal cost-based lending rate (MCLR) by 10 basis points across all tenors. The new rates are applicable from 15 July 2022.

According to the State Bank of India website, the bank has decided to increase the MCLR for loans with maturity of one year to 7.50% from the existing 7.40%. The six-month MCLR rate has been increased from 7.35 percent to 7.45 percent, while the two-year and three-year MCLR rates have been increased to 7.7 percent and 7.8 percent, respectively.

HDFC Bank MCLR

HDFC Bank has increased its marginal cost-based lending rate (MCLR) by 20 basis points (100 basis points = 1%) on all maturity period loans with effect from July 7, 2022.

According to the HDFC Bank website, the overnight MCLR is now 7.70 per cent as against 7.50 per cent earlier. The MCLR for one month is 7.75 per cent. The MCLR for three months and six months is 7.80 per cent and 7.90 per cent respectively. The one-year MCLR for many consumer loans will now be 8.05 percent, two-year MCLR is 8.15 percent and three-year MCLR will be 8.25 percent.

ICICI Bank MCLR

ICICI Bank has increased its marginal cost-based lending rate (MCLR) by 20 basis points for all tenors. One basis point is equal to 0.01 percent. The higher interest rates will be effective from July 1, 2022.

According to the ICICI Bank website, the overnight MCLR rate has been increased from 7.30 percent to 7.50 percent. The one-month and three-month MCLR has been increased to 7.50 per cent and 7.55 per cent, respectively.

What is MCLR?

MCLR is the minimum interest rate that the bank can charge for the loan. Banks are allowed to issue any category of loans at a fixed or floating rate of interest under the MCLR regime. Therefore, for all loans linked to that benchmark, the bank will not lend at a rate that is less than the MCLR of that particular maturity.

according to

The website, “methodology uses marginal costing or latest costing terms which are reflected in the interest rate paid by banks for receiving funds (from deposits and lending) while setting their lending rates. This means deposits by the bank. And the interest rate given for deposits is the deciding factor in the calculation of lending MCLR.”