In September 2025, several Indian banks announced a reduction in their Marginal Cost of Funds-based Lending Rates (MCLR). This move directly benefits borrowers, as MCLR determines the interest rates on loans such as home loans, personal loans, and business loans. A lower MCLR means lower EMIs and reduced borrowing costs.
What is MCLR?
MCLR, or Marginal Cost of Funds-based Lending Rate, is the minimum interest rate below which banks cannot lend. It is linked to the cost of funds for banks and serves as a benchmark for most retail and corporate loans.
Why Did Banks Lower MCLR in September?
Softening Inflation – Stable inflation allowed banks to reduce lending rates.
Liquidity in the Market – Higher cash reserves and strong credit growth encouraged banks to pass benefits to borrowers.
RBI Monetary Policy – RBI’s accommodative stance nudged banks toward easing credit costs.
Impact on Borrowers
Lower EMIs – Borrowers will immediately notice reduced monthly installments on loans linked to MCLR.
Better Loan Affordability – Home and business loans become more accessible due to reduced interest burdens.
Debt Relief – Existing borrowers may request a reset to benefit from lower MCLRs.
Competitive Lending – With multiple banks lowering rates, borrowers can compare offers for the best deal.
Impact on the Economy
Encourages higher credit demand, boosting real estate, small businesses, and retail spending.
Supports economic growth while maintaining financial stability.
FAQs
1. Which loans are affected by MCLR changes?
Loans such as home loans, personal loans, education loans, and business loans linked to MCLR are directly impacted.
2. Will my EMI reduce automatically if MCLR is lowered?
Yes, but only if your loan is linked to MCLR and the reset date for your loan has arrived. Otherwise, you may need to request a rate revision.
3. What’s the difference between MCLR and Repo-Linked Lending Rate (RLLR)?
MCLR is based on the bank’s cost of funds.
RLLR is directly linked to RBI’s repo rate and changes more quickly with RBI decisions.
4. Is this the right time to take a loan?
Yes. With lower MCLRs in September, borrowers can secure loans at reduced interest costs, making it a favorable borrowing window.
5. How often does MCLR change?
Banks typically review and reset MCLR monthly, quarterly, or annually, depending on loan terms.
Published on : 13th September
Published by : SMITA
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