MCLR by 5 bps across tenors in HDFC

By: Makemymoney

On Monday, 7th.Jan’19 HDFC Bank hiked its MCLR (Marginal cost of funds based lending rate) to 8.75%, 8.90% and 9.05% across tenors for one, two and three-year tenors respectively. This increase in MCLR rates is led by its CASA accounts ratio and hike for all the buckets were 5bps. Talking about other banks, then SBI has 8.5% for one year whereas for ICICI MCLR is 8.8%. At the same time, HDFC bank keeps on increasing it’s loan rates from the past four months. The bank had hiked MCLR for one, three and six months MCLR on December by 5 bps.  

However, on Monday the yield on the benchmark is closed at 7.51%. The benchmark 10-year bond yield fell 67 points in past 4 months. The scenario in private banks seems positive, as advance aggregated approximately 7.8 lakh crore in December’18. Which means 23% increase year on year record and deposit grew by 22%. According to experts, the bank’s spread on loans over deposits has expanded to a two year high at approximately 340 BPS led by an improvement in the ration of current account saving the account. Also, over the past 4 to 5 months hike in MCLR rates have been noticed which is leading to a hike in deposit rates as well. 

A higher CASA ratio helps banks to pay lower interest rates. HDFC bank funds have declined over two years of 4.28% for the 2019 financial year and 5.91% for the 2016 financial year. The bank’s one-year deposit rate stands at 7.3% compared to one-year MCLR of 8.75%, placing the spread at 1.45%. Whereas ICICI India’s second largest private bank has hiked it’s MCLR rates by 10% bps to 8.55%, 8.6% and 8.7% for one, three and six months.

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