HDFC Bank's loan EMI may rise as lender hikes MCLR across select tenures

Notably, both of these banks have also recently announced adjustments to their MCLR across various loan maturities.

This shift in lending rates is of significant note, considering the RBI's decision to adopt a vigilant stance on inflation, resulting in the steady maintenance of the repo rate. This approach follows a period of active rate hikes, totalling 250 basis points, undertaken by the Reserve Bank of India (RBI) until a pause in April 2023.

Shaktikanta Das, RBI Governor, in his last policy address, had emphasised that while the repo rates have been raised by 250 basis points, this increase has not been fully transmitted to bank lending and deposit rates.

What this means for borrowers is that there is still room for a potential hike in lending rates. During the period when the RBI increased the repo rate, banks gradually followed suit by raising their lending interest rates, although there was some delay in transmission.

For perspective, when the repo rate increases, lending interest rates follow suit, and when the repo rate decreases, lending interest rates decline as well.