HDFC Bank cuts MCLR by 5 bps as lower funding costs aid repricing

HDFC Bank cut its MCLR for most tenors, reducing the overnight and one‑month rates to 8.00 % | Photo Credit:
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HDFC Bank trimmed its marginal cost of funds‑based lending rate (MCLR) by five basis points on major tenors, positioning itself among the first big banks to pass lower funding costs onto borrowers. Experts say the cut stems from falling deposit expenses, a repricing of the deposit portfolio and robust inflows into foreign‑currency non‑resident (FCNR(B)) deposits, which give banks cheaper funding than domestic term deposits.

Effective August 7, the revised rates saw HDFC Bank cut MCLR for most tenors: overnight and one‑month rates fell to 8.00 %, three‑month to 8.15 %, six‑month to 8.30 % and the one‑year benchmark to 8.40 %. The three‑year MCLR dropped to 8.65 % while the two‑year tenor stayed at 8.55 %.

This contrasts sharply with Bank of India, which lifted its one‑year MCLR to 8.80 % (from 8.75 %) and its three‑month MCLR to 8.35 % (from 8.25 %) effective August 1. Meanwhile, State Bank of India, which usually reviews MCLR on the 15th of each month, has left rates unchanged since June, keeping its one‑year MCLR at 8.70 %.

As of end‑July, the nation’s biggest private bank raised roughly $1.4 billion via FCNR(B) deposits—far above Bank of India’s $207 million—showing its greater capacity to access cheaper overseas funding. Those inflows have lowered deposit costs, giving banks leeway to adjust lending benchmarks.

Siddharth Rajpurohit, lead banking analyst at Systematix Institutional Equities, noted that HDFC Bank has kept its term‑deposit rates steady for the past few months, though a repricing of maturing deposits could have affected its MCLR. He also pointed out that robust FCNR(B) inflows, which carry lower rates than domestic term deposits, are helping reduce the overall cost of funds. Additionally, he suggested that competitive pressure in corporate lending—particularly from private‑sector rivals like ICICI Bank offering lower MCLR—may have prompted HDFC Bank’s move.

Published on August 10, 2026