Indian Overseas Bank MCLR

1. Any loan with overnight and one month MCLR tenors can only be sanctioned by Top Management at the Central Office. All other branches or functionaries cannot sanction loans under these short term subsidiaries. 

1. MCLR changes would enable the borrower to take advantage of future interest rate changes, and the impact on the EMIs will depend on the defined loan's reset period. 

Key Features of MCLR Rates

The following are the main features of MCLR Rates:  

1. Tenure-wise MCLR Rates: IOB publishes MCLR rates that apply to several tenures such as overnight, one month, three months, six months and one year. All of these details are critical because they allow borrowers to select a loan linked to a tenure appropriate for their repayment schedule and financial plan. Rates for shorter tenures adjust more frequently dependent on current market conditions, while those pertaining to longer tenures are more stable showing variation and for providing stability with EMIs. 

1. Frequency of Revision: IOB changes its MCLR monthly so that all loan rates can remain very close to a reflection of all market changes including repo rate changes. This methodology is beneficial to borrowers because the potential to lengthen the interest costs through MCLR might occur faster than they would under the earlier Base Rate. 

1. Effect on Floating and Fixed-Rate Loans: MCLR is likely, if not totally, directed towards floating-rate loans. That said, for fixed-rate loans linked to IOB MCLR, rate activity remains stable until the next reset. These types of standards assist in how borrowers can plan their EMIs and ultimately evaluate the impact of the loan interest rates associated with their withdrawals. 

1. Spread / Markup over MCLR: The final interest rate on any loan product, divided in its detail of calculation, is by adding the spread or markup above the MCLR. The mark-up will be clearly laid out in the loan agreement and the totality of interest which is payable will be charged by the lender. Banks typically only ever change the spread in certain situations and use set spreads in their loans. However, there are circumstances in which they may decide to change the spread above the MCLR. 

Documents Required 

These are the documents you need to provide: 

1. Proof of Identity: Aadhaar, PAN card, Passport 

1. Proof of Address: Utility bill, Passport, Voter ID 

1. Proof of Income/Business: Salary slips, financial statements, Udhyam registration if business 

1. Property Documents :It is required for secured loan application 

1. Other documents: project report, quotations, warranty if applicable, other documents for collateral 

MCLR Historical Rates of Indian Overseas Bank (2016–2024)

The table below provides a comprehensive historical record of Indian Overseas Bank (IOB) MCLR rates available across different MCLR tenors from the introduction of MCLR from April 2016 until April 2024. This comprehensive view allows borrowers and researchers to evaluate how IOB changed its lending rates according to RBI policies and prevailing economic conditions. 

Indian Overseas Bank Lending Rates Overview (2025) 

RLLR (Retail Lending Linked Rate) 

The effective RLLR has been set at 8.35%, calculated on the basis of the 5.50% base component and a 2.85% strategic & risk premium that was effective from 12th June 2025. For existing RLLR loans, the interest rate reset will also be effective from this date.  

The Strategic Premium and Risk Premium components will remain the same until the Bank undertakes a further review. This serves as a reference rate, and is the benchmark for loans tied to RLLR, so that borrowers have a defined rate that will not change without notice. 

Base Rate 

The effective Base Rate for Indian Overseas Bank has been set at 9.80% effective from 15th August 2025 until further notice. The Base Rate is the lowest that IOB will charge for certain loan products and provides a steady rate for any borrowing that is based on rates not linked to MCLR or RLLR.  

How do RLLR, MCLR, and Base Rate differ? 

The Base Rate (2010-2016) was related to banks' average cost of funds. The MCLR (2016 onwards) was an improvement, as it accounted for marginal cost of funds, and was reviewed monthly. RLLR (2019 onwards) is set against the RBI repo rate plus a spread and is the most transparent system available and quickest for changes to be passed on. In 2025, RLLR will apply to most retail loans, MCLR will cover corporate loans and loans taken before RLLR, and the Base Rate will be almost irrelevant. 

Example: Rs.30 Lakh Loan over 20 Years 

To see how these benchmark systems impact borrowers in real life, let’s assume a home loan of Rs.30 lakh with a tenure of 20 years (240 months). 

1. Base Rate (9.80%): Under the Base Rate system, the EMI works out to about Rs.28,640 per month. Because the Base Rate doesn’t react quickly to RBI’s repo cuts, borrowers often ended up paying higher EMIs for longer periods. 

1. MCLR (8.80%): With MCLR, the same loan EMI comes down to roughly Rs.26,440 per month. This is more market-linked, and changes in repo rates are transmitted faster, though still subject to the reset period chosen by the bank. 

1. RLLR (8.35%): Under the repo-linked framework, the EMI drops further to about Rs.25,750 per month. This is the most transparent system because any change in RBI’s repo rate gets reflected in borrower EMIs after the next reset. 

What This Means for Borrowers 

Over 20 years, the difference is massive. A borrower under Base Rate ends up paying about Rs.7 lakh more compared to an RLLR-linked loan for the same amount and tenure. That’s why RLLR is considered the fairest and most cost-effective system in 2025, especially for retail borrowers like home loan customers. 

How Indian Overseas Bank determines its MCLR: 

Banks like IOB base their MCLR on several components: the current cost of funds, the operating cost, and a risk margin. This ensures the interest rate you receive on your loan isn't arbitrary; it will reflect competitive market conditions.  

1. Cost of funds: How much does the bank borrow the money from its depositors or other funds. 

1. Operating cost: Costs related to keeping the bank functioning properly.  

1. Risk margin: A margin for uncertainty related to default or delays.  

Note: Essentially, this creates a transparent benchmark rate, to make it fair lending to borrowers  

How often does IOB change its MCLR?

IOB changes its MCLR once a month, which means the bank can change your interest rate in quick succession with repo rates or other market fluctuations.  Every loan linked to MCLR has a reset period, which indicates the frequency with which any changes to the MCLR will be felt in your EMIs. A one-year reset, for example, means any change to MCLR will only affect your loan repayment once a year. This allows the borrower to better budget and plan for repayments and avoids surprises in their monthly budget. 

Difference between MCLR and Base Rate 

The table below summarises the key differences between MCLR and Base Rates:  

How MCLR Impacts Your Loan Repayments

For borrowers, MCLR is not just another number; it is a factor that influences your EMIs directly. Anything that is linked to IOB MCLR, such as home loans, personal loans, auto loans and business loans will reset interest based on the period of reset. So, for example, if you have a one year reset on your home loan, any change to the MCLR will impact your EMIs only after 12 months. This gives the borrowers certainty around their monthly payments and allows them to budget better. 

Moreover, moving from a Base Rate loan to an MCLR linked loan is beneficial to the borrower because, in standalone terms, the existing interest rate may be significantly higher than the current MCLR plus the spread. The difference will lead to a reduction in the EMI and consequently worthwhile savings in terms of interest over the duration of the loan tenure. With the right loan tenure and proper monitoring of MCLR movements, borrowers can take advantage of falling trends of market rates to reduce their overall loan burden. 

Example: The final loan rate is MCLR + Spread/Markup, which depends on the borrower’s profile, the type of loan and the loan tenure. For example, if the one-year MCLR is 8%, and your spread is 0.4%, your effective interest rate is 8.4%. By comprehending this relationship, borrowers will have more information to determine their refinancing, switching loans or considering the option to take a new loan. 

Types of Loans Linked to IOB MCLR 

The different types of Loans associated with IOB MCLR are as follows:  

Home Loans 

Home loans are a very common type of loan associated with IOB MCLR. Borrowers benefit from the interest rate being responsive to changing conditions in the market. The interest rate for a floating-rate home loan is constructed by attaching a spread or markup in relation to the applicable MCLR. Here it is critical for borrowers to keep watch of MCLR, and their reset period. Once borrowers have comfort with the structure associate with MCLR, they can plan their EMIs (equated monthly instalments) much better, especially in the case of repo rate adjustments. 

Personal Loans 

A number of personal loan offerings from IOB are linked to MCLR. These personal loans carry a more competitive interest rate than personal loans linked to Base Rate loans. The loans are identified at MCLR, which is a reflection of the bank's existing cost of funds. As a result, the borrower is more likely to see different changes in interest rates at each reset period, which is more observable where the tenure is short-term or earlier versus longer term. This helps ensure that personal loan borrowers can pay a rate that is more reflective of what is actually happening in the market. 

Auto Loans 

Vehicle financing, or auto loans as we know them, involve an arrangement with IOB in which the loans can be linked to the bank's MCLR. Once again, the connection to MCLR ensures that the interest rate charged to borrowers will be a fair interest rate for the loan type because it is based on the bank's marginal cost of funds. Generally, auto loans are structured with shorter tenure than home loans, so rate changes may frequently affect EMIs. The implications of linking an auto loan to MCLR should be taken into account when budgeting for monthly auto loan repayments. 

Business Loans 

The loans offered by IOB to MSMEs and the loans for businesses are generally linked to the bank's MCLR. Since the MCLR is a transparent method for charging interest on loans, businesses can assess their interest cost, depending on the MCLR rate and agreed spread, for their loan granted. By selecting a tenure and understanding their respective reset periods, the business loans holders will be able to better anticipate repayment timetables and address future cash flows, which helps reduce the risk from unexpected interest rate increases. 

Special Government-backed Loans 

Some of the government-supported schemes or subsidised loans that are also in the market do use MCLR to benchmark loan interest rates. These loans include loans aimed at developing entrepreneurship, expanding MSMEs or to socially inspired projects. The benefit of linking those loans to MCLR is that a borrower has access to affordable credit while amending MCLR at interest rates that reflect market changes, endorsing transparency and efficiency in the borrowing framework. 

How to Apply for IOB Loans linked with MCLR

1. Online application 

Follow the steps below to apply for IOB loans linked with MCLR:  

1. Step 1: Visit the IOB official website and go to loans. 

1. Step 2: Select the loan you want (home loan, personal loan, business loan, etc.) that is linked to MCLR. 

1. Step 3: Fill in the online application form accurately with personal, financial and business details. 

1. Step 4: Submit the application with all document (Identity, address, income proof/business proof, and in case of property also property papers). 

1. Step 5: Keep your application reference number safe somewhere to track your application. IOB officials will check the application and do credit appraisal through online checks. 

1. Step 6: Once it is well-accepted, then a loan agreement will be issued for e-signature. 

1. Step 7: After signing the agreement, IOB will credit an approved loan amount to your account on its timelines. 

2. Offline application through Branch 

The application process to apply for a IOB loan offline is outlined below:  

1. Step 1: Visit the nearest IOB branch, which has MCLR linked loans. 

1. Step 2: Collect the physical application form and fill it with correct details. 

1. Step 3: Submit your completed application form and all documents to the bank official. 

1. Step 4: The bank staff will verify documents and do the credit appraisal at the branch of your application. 

1. Step 5: As soon as the verification is complete, the loan sanctioned agreement/documents will be explained, signed and returned. 

1. Step 6: The approved loan amount will be credited to your account after all internal approvals are taken. 

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