Updated Jul 10, 2025 14:57 IST
The MCLR is the minimum interest rate that banks in India can charge on loans including home loan.
Introduced by RBI in 2016, MCLR is designed to ensure fair lending rates by linking them to the marginal cost of funds, which includes the cost of borrowing and other operational expenses. It varies across different tenors (e.g., overnight, 1 month, 3 months, etc.) and is reviewed periodically to reflect changes in the bank’s funding costs and RBI policies.
The rate slightly decreases to 8.65 per cent for a 3-month tenor, indicating a marginal adjustment as the loan duration increases. For a 6-month tenor, the MCLR is set at 8.75 per cent, and it holds steady at this rate for both 1-year and 2-year tenors.
For longer tenors, the MCLR sees a gradual increase, reaching 8.80 per cent for a 3-year period.
It also cut the cash reserve ratio by 100 basis points to 3 per cent, adding Rs 2.5 lakh crore to already surplus liquidity in the banking system.
The 100 basis point cut in cash reserve ratio (CRR) will be carried out in four equal tranches of 25 bps each with effect from the fortnights beginning September 6, October 4, November 1 and November 29, 2025.
With the latest reduction, RBI has now cut interest rates by a total of 100 basis points in 2025, starting with a quarter-point reduction in February – the first cut since May 2020 – and another similar-sized cut in April.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
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