MCLR for All Banks - Interest Rates
What is MCLR?
The RBI introduced the Marginal Cost of Funds based Lending Rate (MCLR) in April 2016 to replace the base rate system. It aims to improve transparency and ensure faster transmission of RBI’s rate cuts to borrowers, especially for home loans. Banks usually set the MCLR 5 to 50 basis points lower than the base rate, as it more closely follows the repo rate.
Current MCLR Rates 2025
Bank Name | Tenor | MCLR Rate (%) |
State Bank of India | 3 Year | 8.90% |
2 Year | 8.80% | |
1 Year | 8.75% | |
6 Month | 8.65% | |
3 Month | 8.30% | |
1 Month | 7.90% | |
Overnight | 7.90% | |
HDFC Bank | 3 Year | 8.75% |
2 Year | 8.75% | |
1 Year | 8.70% | |
6 Month | 8.70% | |
3 Month | 8.60% | |
1 Month | 8.55% | |
Overnight | 8.55% | |
Axis Bank | 3 Year | 8.90% |
2 Year | 8.85% | |
1 Year | 8.75% | |
6 Month | 8.70% | |
3 Month | 8.65% | |
1 Month | 8.55% | |
Overnight | 8.55% | |
Punjab National Bank | 3 Year | 9.10% |
2 Year | N/A | |
1 Year | 8.80% | |
6 Month | 8.65% | |
3 Month | 8.45% | |
1 Month | 8.25% | |
Overnight | 8.00% | |
IndusInd Bank | 3 Year | 10.35% |
2 Year | 10.25% | |
1 Year | 10.15% | |
6 Month | 10.15% | |
3 Month | 10.05% | |
1 Month | 10.00% | |
Overnight | 9.95% | |
RBL Bank | 3 Year | N/A |
2 Year | N/A | |
1 Year | 9.60% | |
6 Month | 9.60% | |
3 Month | 9.00% | |
1 Month | 8.85% | |
Overnight | 8.55% | |
DBS Bank | 3 Year | 8.55% |
2 Year | 8.55% | |
1 Year | 8.25% | |
6 Month | 8.25% | |
3 Month | 8.05% | |
1 Month | 8.05% | |
Overnight | 8.05% | |
Canara Bank | 3 Year | 8.95% |
2 Year | 8.90% | |
1 Year | 8.75% | |
6 Month | 8.55% | |
3 Month | 8.20% | |
1 Month | 8.00% | |
Overnight | 7.95% | |
Bank of Baroda | 1 Year | 8.80% |
6 Month | 8.65% | |
3 Month | 8.35% | |
1 Month | 7.95% | |
Overnight | 7.95% | |
IDFC First Bank | 3 Year | N/A |
2 Year | N/A | |
1 Year | 10.20% | |
6 Month | 9.80% | |
3 Month | 9.75% | |
1 Month | 9.60% | |
Overnight | 9.60% | |
Bank of India | 3 Year | 9.00% |
2 Year | N/A | |
1 Year | 8.85% | |
6 Month | 8.70% | |
3 Month | 8.45% | |
1 Month | 8.30% | |
Overnight | 7.95% | |
Nainital Bank | 3 Year | 10.00% |
2 Year | 10.00% | |
1 Year | 8.80% | |
6 Month | 8.50% | |
3 Month | 8.25% | |
1 Month | 8.05% | |
Overnight | 7.95% | |
Jammu & Kashmir Bank | 3 Year | 9.25% |
2 Year | 9.20% | |
1 Year | 8.75% | |
6 Month | 8.60% | |
3 Month | 8.20% | |
1 Month | 8.10% | |
Overnight | 8.00% |
Note: The above-mentioned rates are updated as of September 2025.
MCLR (Marginal Cost of Funds-Based Lending Rate) is the lowest interest rate that a bank or a lender can offer. Most banks cannot offer interest rates lower than the MCLR (Marginal Cost of Funds-Based Lending Rate). The Reserve Bank of India (RBI) allows certain exceptions in specific cases.
RBI Guidelines about MCLR
The following guidelines are issued by the Reserve Bank of India (RBI):
- MCLR changes do not impact fixed-rate home loans.
- Banks calculate MCLR by considering deposits and other borrowings.
- Banks must publish MCLR rates for different loan durations.
- Lenders fix the MCLR rate at the time they approve your floating rate loan, and it remains unchanged until the next reset date.
How MCLR Affects Home Loan Interest Rates
MCLR (Marginal Cost of Funds Based Lending Rate) directly impacts your home loan interest rate. It's the minimum rate at which banks lend, based on their cost of funds. When applying for a home loan, your interest rate is usually linked to the bank’s MCLR, with an added spread (e.g., MCLR + 0.5%).
If MCLR increases, your home loan rate will rise, leading to higher EMIs. Conversely, if MCLR decreases, your rate will drop, reducing your EMIs. This makes MCLR-based loans more flexible, reflecting changes in the economy and RBI policy rates.
In short, MCLR’s monthly adjustments can affect your home loan’s cost, so it’s important to stay updated on MCLR changes to manage your loan effectively.
Difference Between MCLR & Base Rate
MCLR | Base Rate |
|
|
Difference Between MCLR & Repo Rate
MCLR (Marginal Cost of Funds Based Lending Rate) | Repo Rate |
Minimum interest rate banks can offer to borrowers | Rate at which RBI lends money to commercial banks |
Set by individual banks | Set by RBI (Reserve Bank of India) |
Affects loan interest rates (like home loans) | Used to control inflation and manage the economy |
Depends on bank’s cost of funds | Depends on RBI’s monetary policy decisions |
Different for each bank | Same for all banks |
Directly impacts home loans and other floating rate loans | Indirectly impacts loans by influencing MCLR |
How to Calculate MCLR?
To calculate the MCLR (Marginal Cost of Funds-Based Lending Rate , you must consider all the borrowing sources for a bank. A bank borrows from several sources including, fixed deposit, current accounts, savings accounts, etc.
You can use the interest rates from these borrowing sources to calculate the marginal borrowing cost. You must understand that the source of a bank’s funds is not only borrowing, but also the equity (retained or infused earnings). Thus, return on equity can also be expected.
The formula prescribed by the Reserve Bank of India for calculation of MCLR is given below:
Marginal cost of funds = Marginal borrowing cost x 92% + return on the net worth x 8%
Banks must also maintain a cash reserve ratio of 4%. On this deposit, no interest is earned by the bank. Under MCLR, banks can avail some allowance called Negative Carry on CRR. Also, the operating costs must be considered and taken care of.
There are several expenses of a bank that include raising funds, opening branches, paying salaries to its employees, etc. These are not charged to the customers. Finally comes the discount or tenor premium. The reset period for the interest rate is called the tenor. It is directly proportional to the reset period i.e., the tenor is higher if the reset period is higher.
Thus, MCLR depends on
- Tenor premium,
- Operating costs of the bank,
- Negative carry-on Cash Reserve Ratio, and
- Marginal cost of funds.
How To Convert Base Rate Home Loan to MCLR?
The decision to switch to MCLR from base rate depends majorly on the actual benefits and the transfer cost. Various banks charge differently for this switch. However, there are certain banks that allow you to convert home loan to MCLR without charging anything.
Example: Consider you have borrowed an amount of Rs.40 lakh as home loan and you intend to repay it over a tenure of 20 years. The base associated with your home loan stands at 9.95%.
After a period of three years from the commencement of the loan tenure, you would have paid an amount of Rs.38,468 as your monthly instalments. You have also paid an interest amount of Rs.11,63,514.
If you choose to continue on the same path with your base rate, you will be paying a total interest of Rs.52,32,428. However, if you choose to switch to MCLR for your home loan at 8.55% for the remaining tenure (17 years in this case), you will be paying an interest of Rs.34,00,396. This is the amount that you have paid for 17 years.
So, the total interest that you pay for your home loan is (Rs.11,63,514 + Rs.34,00,396) which comes up to Rs.45,63,910. It shows that you save a substantial amount of Rs.6,68,518 by switching to MCLR from base rate.
So, a spending a few thousand for converting to MCLR from base rate can reward you a hefty sum in the long run.
FAQs on MCLR Rates
- What is the full form of MCLR in banking?
MCLR in banking stands for Marginal Cost of Funds Based Lending Rate.
- What is an MCLR based home loan?
An MCLR-based house loan is one in which the interest rate is set by the bank's maximum collateral loan rate (MCLR), subject to revision as the MCLR is updated. As it represents the bank's true cost of funding, this kind of system is more transparent than the previous base rate system.
- What is the operating cost?
The expenses that banks spend during the fund-raising process are referred to as the operating cost in the context of the Marginal Cost of Funds Based Lending Rate (MCLR). Operating costs are just one of the many factors that MCLR considers. Operating costs comprise all of the costs associated with keeping the bank's operations running smoothly, including rent, personnel, administrative charges, and other regular operating expenditures.
- Is MCLR different for every bank?
Yes, MCLR varies from bank to bank.
- Why did the RBI implement MCLR?
To increase transparency in the manner banks set lending rates, RBI introduced the Monetary Chart Layout Ratio (MCLR). Allowing for the smooth and prompt adjustment of the lending interest rate in response to changes in RBI policy was another justification.
- What elements make up MCLR?
The loan duration, the cost of funds, bank operational costs, and the negative carry on the CRR determine the MCLR interest rate
- What is the cutoff date by which banks must release the monthly MCLR?
By the end of the working day on each month, the banks are required to release the monthly MCLR. Their website and bank offices need to have this up.
- Do your loans have to be connected to MCLR?
Yes, starting on April 1, 2016, all banks must tie their loans to the MCLR. This is compliant with the December 2015 rules released by the RBI.
News on MCLR Interest Rates
Major Public Sector Banks Lower MCLR, 2025
Five key public sector banks in the country have lowered their MCLR (Marginal Cost of Funds-Based Lending Rates). The Bank of Baroda, Canara Bank, Punjab National Bank, and Indian Bank have reduced their MCLR by 5 bps (basis points), while HDFC Bank has lowered it by 30 bps. The reduction announced by the major banks is expected to lower loan EMIs, making this welcome news for borrowers.
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