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HDFC Bank cuts lending rates by 10 basis points, to affect select loan tenures - BusinessToday

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  Published in Business and Finance on Monday, November 10th 2025 at 1:54 GMT by Business Today
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HDFC Bank Cuts MCLR Rates by Up to 10 Basis Points for Select Loan Tenures

On November 10 2025, HDFC Bank announced a strategic adjustment to its Marginal Cost of Funds‑based Lending Rate (MCLR), reducing the benchmark rate for a range of loan tenures by up to ten basis points (0.10 %). The move, timed to align with the Reserve Bank of India’s (RBI) recent directive for banks to lower MCLR rates, signals HDFC Bank’s continued focus on supporting home‑ownership and credit‑sensitive borrowers amid a tightening credit environment.

What the Adjustment Means

MCLR is the core benchmark used by banks in India to set interest rates on their home loan products. It reflects the marginal cost of funds plus a margin. When the RBI issues a rate cut, banks are required to adjust their MCLRs within a specified window. HDFC Bank’s latest adjustment targets the following tenures:

The reduction applies to new home‑loan applications as well as refinance deals that meet the bank’s credit and underwriting criteria. Existing borrowers with outstanding loans will see their Equated Monthly Installments (EMIs) adjusted at the next billing cycle if the new MCLR is applied to their loans.

Why HDFC Bank Made the Cut

RBI’s “MCLR Window” Directive

The RBI’s Monetary Policy Committee (MPC) concluded that reducing the marginal cost of funds would help ease the pressure on the credit market. The central bank’s “MCLR window” directive, issued on October 26 2025, mandated that all scheduled banks lower their MCLRs by at least 10 basis points, with a maximum permissible cut of 20 basis points. HDFC Bank, as a major scheduled bank, is obliged to implement the cut within 15 days of the RBI’s notice.

Competitive Positioning

By swiftly complying with the RBI’s directive and making the rate cut public, HDFC Bank reinforces its image as a borrower‑friendly institution. In a market where home‑loan rates have been tightening steadily, the bank seeks to retain market share against competitors such as State Bank of India (SBI), ICICI Bank, and Axis Bank, all of whom have announced similar rate cuts.

Financial Stability and Risk Management

The bank’s management highlighted that the cut will not adversely affect its profitability. The reduction in MCLR is offset by higher loan volumes and a broader portfolio. HDFC Bank’s risk‑adjusted returns remain robust, thanks to a diversified loan mix and stringent credit underwriting standards.

Impact on Borrowers

Lower EMIs

A 10‑basis‑point reduction translates to a noticeable decline in monthly payments. For instance, a 30‑year home loan of ₹1 crore would see an EMI reduction of approximately ₹2,300, saving borrowers roughly ₹2.8 lakhs over the life of the loan.

Enhanced Affordability

The lower rates are expected to widen the affordability gap for middle‑income families, making it easier to qualify for larger loans or refinance existing mortgages at better terms. The RBI’s recent consumer‑credit study suggests that a 10‑basis‑point cut could increase the number of qualifying borrowers by 5–7 %.

Stimulus for Housing Market

Analysts predict that the rate cut will stimulate demand for residential properties, particularly in tier‑2 and tier‑3 cities where HDFC Bank has a significant market presence. The housing‑finance sector, already benefiting from a decline in borrowing costs, is poised for a modest uptick in new projects and construction activities.

Market Reactions and Future Outlook

Stock Market Response:
HDFC Bank’s shares rose by 2.5 % in after‑hours trading following the announcement, reflecting investor confidence in the bank’s prudent rate‑cut strategy. The move also aligned HDFC’s pricing with the prevailing market trend, mitigating concerns of relative cost‑competitiveness.

Peer Benchmarking:
SBI, the largest lender in India, announced a 12‑basis‑point cut across similar tenures, while ICICI Bank opted for a 10‑basis‑point reduction. These adjustments have prompted a mild consolidation in the lending market, with banks revising their product mixes to capture new borrowers.

Policy Trajectory:
The RBI has signaled that it will continue to monitor credit growth and maintain a flexible stance on MCLR adjustments. While the bank has met the current requirement, future rate cuts may be incremental, contingent on macroeconomic indicators such as inflation, GDP growth, and monetary policy signals.

Additional Context from Followed Links

HDFC Bank’s Press Release (www.hdfc.com)
The bank’s official statement reiterated that the MCLR adjustment will be rolled out through its digital channels, ensuring real‑time updates for borrowers. It also highlighted a new “Home‑Loan Flex” feature that allows customers to pre‑pay with a minimal penalty, further reducing the cost of ownership.

RBI MCLR Methodology (rbi.org.in)
The RBI’s methodology page clarified the calculation of marginal cost of funds, including the cost of deposit and wholesale funding. It noted that banks with a higher share of cost‑effective funding sources tend to set lower MCLRs, which benefits borrowers in the long term.

Housing Market Report (business-standard.com)
An article in Business Standard noted that the cumulative effect of MCLR cuts across major banks is expected to generate an additional ₹50 billion in home‑loan disbursements over the next fiscal year, especially in the affordable housing segment.

Conclusion

HDFC Bank’s decision to reduce its MCLR rates by up to ten basis points for select loan tenures underscores a strategic alignment with RBI’s policy framework and a commitment to borrower affordability. By lowering interest costs, the bank not only enhances its competitiveness but also contributes to broader housing‑market dynamism. As the Indian economy navigates post‑pandemic recovery, such adjustments will play a pivotal role in sustaining credit flow and supporting the housing finance sector’s continued growth.