HDFC Bank has raised its Marginal Cost of Funds Based Lending Rate (MCLR) by 10 basis points (bps) effective today i.e. September 7. (100 basis points = 1 percent). A rise in the MCLR rate means an increase in loan interest for both new and existing borrowers, including EMIs for house loans, auto loans, and any other loan with a marginal cost.

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According to the updated rates, HDFC Bank's one-year MCLR has risen to 8.2 percent, while the overnight MCLR has jumped to 7.9 percent. The one-year MCLR is significant in terms of retail loans since long-term loans such as home loans are tied to this rate.

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The MCLR for the one-month, three-month, and six-month tenors will be 7.90 percent, 7.95 percent, and 8.05 percent, respectively.

HDFC Bank hiked the marginal cost of fund-based lending rates by 5-10 basis points across various tenors last month too.

MCLR was introduced in April 2016, with banks given a formula to compute their cost of financing and then conducting monthly evaluations of their offers across various tenors.

Each bank determines its MCLR by factoring in things like the incremental cost of generating funds and operational expenditures, among other things.

Also read: Yes bank hikes interest rates on NRE and FCNR fixed deposits

Along with HDFC Bank, other banks are also raising lending rates.

This decision comes in the wake of Reserve Bank of India (RBI) increasing benchmark policy rates by 50 bps last month to tame headline inflation. With this repo rate hike and two previous increases, the overall lending rates have surged by at least 190 basis points, or 1.9 percent.

(Edited by : Anshul)