HDFC Cut Loan Interest Rates by 0.5% in March – Myth or Fact?

In recent months, many borrowers have been asking whether HDFC Bank reduced loan interest rates by 0.5% (50 basis points) in March. This confusion largely emerged after the Reserve Bank of India (RBI) cut the repo rate earlier in 2025, which usually encourages banks to reduce lending rates as well.

However, the reality is slightly different from what many people believe. While HDFC Bank did revise its loan benchmark rates around that time, the actual reduction was far smaller than 0.5%.

Why People Believe the 0.5% Rate Cut Happened?

The misunderstanding began after the RBI reduced the repo rate by 50 basis points (0.50%) in June 2025, bringing it down to 5.50%. This move was meant to make borrowing cheaper and stimulate economic growth.

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When the RBI cuts the repo rate, banks often follow by lowering their own lending rates. Because of this, many borrowers assumed that banks such as HDFC would also reduce loan rates by the same amount.

But banks do not always pass the entire reduction to borrowers immediately.

What HDFC Actually Did?

Instead of cutting lending rates by 0.5%, HDFC Bank reduced its Marginal Cost of Funds-based Lending Rate (MCLR) by a much smaller margin.

• The bank reduced MCLR by about 10 basis points (0.10%) across loan tenures.
• Earlier in 2025, some revisions even ranged between 5–15 basis points (0.05%–0.15%) depending on the tenure.

This means the actual reduction was one-fifth of the widely believed 0.5% cut.

Since many home loans, personal loans, and car loans are linked to benchmarks like MCLR or repo-linked rates, borrowers may see small reductions in EMIs, but not as large as a 0.5% cut would suggest.

Why Banks Don’t Pass the Full Repo Rate Cut

Banks consider several factors before lowering lending rates:
 

Also Read : Navigating Interest Rates

Because of these factors, rate transmission from RBI to bank loans is gradual, not immediate.

Conclusion

So, the claim that HDFC cut loan interest rates by 0.5% in March is a myth. The bank did reduce its benchmark lending rates, but the cut was around 0.10% (10 basis points) for most tenures.

For borrowers, this still provides some relief in the form of slightly lower EMIs or shorter loan tenures. However, the reduction is far smaller than the widely circulated 0.5% figure.

In simple terms, loan rates did fall, but not by half a percentage point.