Image Source: Outlook Business
Kotak Mahindra Bank has announced a revision in its Marginal Cost of Funds-based Lending Rate (MCLR), with the one-year MCLR now set at 8.60%, effective August 16, 2025. This move aligns with broader industry trends and reflects the bank’s response to evolving monetary conditions and cost of funds.
Key Highlights
One-year MCLR revised to 8.60%, up from 8.55% previously.
The new rates apply to all MCLR-linked loans disbursed or reset on or after August 16.
The revision follows a series of incremental hikes across tenures since early 2025.
Overnight and short-term MCLR rates remain unchanged for now.
What Is MCLR and Why It Matters
MCLR is the minimum interest rate below which banks are not permitted to lend, except in certain cases allowed by the Reserve Bank of India. It is recalculated monthly based on factors such as:
Marginal cost of funds
Operating expenses
Tenor premium
Cost of maintaining cash reserve ratio
Kotak Mahindra Bank’s MCLR revision directly impacts borrowers with floating-rate loans linked to MCLR, including home loans, personal loans, and business credit lines.
Comparative Rate Structure Across Tenures
As of August 16, 2025, Kotak Mahindra Bank’s updated MCLR structure is:
Overnight: 8.10%
1 Month: 8.35%
3 Months: 8.80%
6 Months: 9.15%
1 Year: 8.60%
2 Years: 9.20%
3 Years: 9.30%
This revision places Kotak’s one-year MCLR slightly below peers like HDFC Bank (9.40%) and Axis Bank (9.35%), but above SBI (8.95%) and ICICI Bank (9.10%).
Implications for Borrowers
Loan Reset Impact Borrowers with MCLR-linked loans will see their interest rates adjusted upward during the next reset cycle, typically every 6 or 12 months.
EMI Changes A 5 basis point increase in MCLR could raise EMIs modestly. For example, a ₹50 lakh home loan with a 20-year tenure may see an increase of ₹150–₹200 per month.
Fixed vs Floating Debate With MCLR rates rising gradually, some borrowers may consider switching to fixed-rate loans or external benchmark-linked loans for rate stability.
Strategic Context Behind the Revision
Kotak’s rate adjustment is part of a broader recalibration across the banking sector:
The RBI has maintained a cautious stance on repo rates amid softening inflation, but banks continue to adjust MCLR based on internal cost structures.
Deposit rates have risen steadily, increasing the marginal cost of funds for banks.
Kotak’s move reflects its effort to balance profitability with competitive lending.
The bank’s decision also signals confidence in credit demand, particularly in retail and MSME segments, where MCLR-linked products dominate.
Outlook and Market Sentiment
Analysts expect further MCLR adjustments in the coming quarters if deposit costs continue to rise:
The one-year median MCLR across Indian banks rose from 8.55% in March to 8.60% in April, indicating a sector-wide trend.
Kotak Mahindra Bank’s rate hike is seen as moderate and in line with expectations.
Borrowers are advised to monitor reset dates and explore refinancing options if rates continue to climb.
Sources: Financial Express, CNBC TV18
Advertisement
Advertisement
