HDFC Bank has reduced its Marginal Cost of Funds-Based Lending Rates (MCLR) across seven loan tenures, offering potential relief to borrowers whose loans are linked to this benchmark. The revised rates came into effect on October 7, 2026, and range from 7.75% to 8.55%, depending on the tenure.
The move is notable because it comes at a time when borrowing costs are under close watch across India. The Reserve Bank of India (RBI) raised its benchmark repo rate by 25 basis points to 5.50% on October 7. Despite this increase, HDFC Bank lowered its MCLR benchmarks by 5 to 15 basis points.
The reduction could help eligible borrowers pay less interest on certain existing loans when their rates are reset. However, it does not mean that every HDFC Bank customer will automatically receive a lower interest rate or a reduced monthly instalment. The impact depends on the type of loan, its benchmark and the conditions in the loan agreement.
What Is MCLR and Why Does It Matter?
MCLR stands for Marginal Cost of Funds-Based Lending Rate. It is an internal benchmark that banks use to determine interest rates on certain loans. It reflects factors such as the cost of raising funds, operating expenses and other prescribed components.
For loans linked to MCLR, the final lending rate generally consists of the applicable MCLR plus a bank-defined spread. When the benchmark falls, the interest rate on an eligible loan may also decline, provided the applicable terms allow the change to pass through.
A basis point is one-hundredth of a percentage point. Therefore, a reduction of 15 basis points means a decrease of 0.15 percentage points, not 15 percentage points.
For example, if a loan’s benchmark falls from 8.00% to 7.85% and the spread remains unchanged, the benchmark-linked lending rate could decline by 0.15 percentage points at the applicable reset date.
HDFC Bank’s New MCLR Rates From October 7, 2026
The bank’s revised benchmarks are lower across all seven listed tenures. The biggest reduction is in the one-month MCLR, which has fallen by 15 basis points.
| Loan benchmark tenure | September rate | October rate |
|---|---|---|
| Overnight | 7.90% | 7.80% |
| One month | 7.90% | 7.75% |
| Three months | 8.05% | 7.95% |
| Six months | 8.25% | 8.15% |
| One year | 8.35% | 8.30% |
| Two years | 8.45% | 8.40% |
| Three years | 8.60% | 8.55% |
The revised figures show reductions of 5 to 15 basis points across the listed tenures. The changes may benefit eligible borrowers, although the actual reduction in an individual loan’s interest rate will depend on its terms and reset schedule.
Which Borrowers Could Benefit From the Rate Cut?
The main beneficiaries are customers whose loans are specifically linked to HDFC Bank’s MCLR benchmark. These may include certain existing home loans, business loans and other eligible floating-rate loans.
Home loan borrowers may receive relief when their applicable benchmark resets. If the revised benchmark lowers their effective interest rate, the bank may reduce their EMI, shorten the remaining repayment period or apply a combination of the two, depending on the loan’s terms.
However, many newer retail loans are linked to an external benchmark, such as the RBI repo rate, rather than MCLR. These loans will not automatically become cheaper because HDFC Bank has reduced its MCLR.
Borrowers should therefore check three things before expecting any savings:
- Whether their loan is linked to MCLR or another benchmark.
- Which MCLR tenure applies to their loan.
- When their next interest-rate reset is scheduled.
How Much Could Your EMI Decrease?
The actual savings depend on the outstanding loan amount, current interest rate, remaining tenure and the size of the rate reduction.
Consider an illustrative example of a home loan with an outstanding balance of ₹50 lakh and 20 years remaining. If its effective interest rate falls from 8.50% to 8.40%, and the repayment tenure remains unchanged, the approximate EMI would decrease from ₹43,391 to ₹43,087 per month.
Illustrative home loan calculation
Before rate reduction
₹43,391
Monthly EMI at 8.50%
After rate reduction
₹43,087
Monthly EMI at 8.40%
Approximate monthly saving
₹304
This is a hypothetical example, not a prediction of HDFC Bank’s actual EMI changes. It assumes a 0.10-percentage-point reduction, an unchanged tenure and a standard monthly repayment calculation.
A reduction of just 5–15 basis points may appear small, but the effect can accumulate over time. Actual savings will vary, and some borrowers may see no immediate change if their loans use a different benchmark.
Why Did HDFC Bank Cut Rates Despite the RBI’s Rate Hike?
The timing of the decision is particularly noteworthy. The RBI raised its repo rate to 5.50% on October 7, 2026, while HDFC Bank reduced its MCLR benchmarks on the same date
These rates serve different purposes. The repo rate is the rate at which the RBI lends short-term funds to eligible banks against securities under its policy framework. MCLR, meanwhile, reflects a bank’s funding costs and other prescribed factors.
Consequently, a change in the repo rate does not have to produce an identical, immediate change in every MCLR benchmark. Banks may adjust different benchmarks according to funding costs, liquidity conditions and their own pricing decisions.
The available reporting confirms the rate reduction but does not establish one definitive reason for HDFC Bank’s decision. It would therefore be premature to conclude that the bank expects borrowing costs to decline across the entire economy.
What Should Customers Do Next?
Existing HDFC Bank borrowers should review their loan statements or contact the bank to establish whether the new rates apply to their accounts. Those with MCLR-linked loans should ask when their next reset will occur and whether the bank will adjust their EMI or repayment tenure.
Customers considering a new loan should compare the actual interest rate offered, processing fees, repayment conditions and benchmark structure rather than choosing a loan solely because its MCLR is lower.
The broader interest-rate environment also matters. Inflation, international crude oil prices, RBI policy decisions and banking-system liquidity could all influence future borrowing costs.
Conclusion
HDFC Bank’s October 2026 decision reduces MCLR benchmarks by up to 15 basis points, potentially easing interest costs for eligible borrowers. The largest reduction is in the one-month benchmark, which has fallen to 7.75%.
Nevertheless, the impact will not be uniform across all customers. Borrowers whose loans are linked to MCLR may benefit at their next reset, while those whose loans follow an external benchmark will need to assess their separate loan terms.
For customers, the most important next step is to check the benchmark attached to their loan and calculate the actual change in their repayment obligations.
About The Author
