HDFC and PNB Increase Lending Rates Starting Today, Home Loan EMIs Will Rise

India’s largest housing finance company, HDFC, has raised its retail prime rate (RPLR) on home loans, against which its variable rate (ARHL) or floating rate home loans are benchmarked, by 5 basis points. . The new rates take effect from today, a move that will lead to increased EMIs for borrowers.

Today, the state-owned Punjab National Bank (PNB) also raised its marginal cost of funds-based lending rate by 15 basis points. The new rates take effect June 1, PNB said in a regulatory filing. Many lending institutions have recently raised lending rates after an off-cycle rate hike by the Reserve Bank in May. The central bank raised the repo rate – at which it lends short-term money to banks – by 40 basis points to 4.40%.

With the revision, the one-year NBI MCLR rate rose to 7.40% from 7.25% earlier. With this increase, EMIs will increase for borrowers who benefited from loans on MCLR.

Latest PNB MCLR rates:

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The chart above shows the overnight, one-month, and three-month MCLR rising 15 basis points to 6.75%, 6.80%, and 6.90%, respectively. The six-month MCLR rose to 7.10% while the three-year MCLR rose 15 basis points to 7.70%.

Recently, many banks such as State Bank of India and Bank of Baroda have increased their marginal cost of funds based lending rate (MCLR) across all tenures.

All existing variable rate bank loans are linked to the MCLR or the external lending reference rate (EBLR) or the base rate.

For borrowers whose loans are linked to an existing MCLR-linked variable rate loan, this upward revision to the loan rate will increase their loan EMIs on the refixing date.

The MCLR was introduced in April 2016 to replace an old base rate system. Following an RBI directive in 2019, all personal loans (such as home, car, personal and education loans) issued since October 1, 2019, however, must be linked only to EBLR.

Banks calculate their MCLR taking into account factors such as the additional cost of fundraising (for example, through deposits) and operating expenses, among others.

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