HDFC raises prime lending rate by up to 20 basis points; first hike since 2013

The country's largest mortgage financier is the latest to hike its lending rates - following the footsteps of the commercial banks, private and state-owned alike, Housing Development Finance Corp (HDFC) today upped its rates by up to 0.20%. This is reportedly the first time it has increased its retail prime lending rate (RPLR) since 2013, further proving that interest rates are now on an upward trajectory after its long easing cycle.

According to an official statement from the company, the increase in RPLR, on which it benchmarks the Adjustable Rate Home Loan, is effective from April 1. The company spokesperson added that the rate hike is progressive, pegged to the loan size. So the RPLR has gone up just 5 basis points or 0.05% on low-ticket size loans, including the priority sector loans. Loans of under Rs 30 lakh will now be available at 8.45% (8.40% for female borrowers); loans between Rs 30 lakh and Rs 75 lakh will be available at 8.60% and those above Rs 75 lakh will be available at 8.70%.

The Economic Times pointed out in a report that HDFC's benchmark PLR had come down from its peak of 16.75% in December 2013 to 16.15% before this latest uptick. It currently stands at 16.35%. "This hike reflects the increase in our cost of funds since October. Between July 2017 and now, 10-year government bond yields have risen 100 basis points. Although yields have come down since February-March, they are still high," HDFC CEO Keki Mistry told the daily, adding, "This hike in PLR will help us maintain our margins in the 2.20% to 2.35% range, which has been our historic average for more than 10 years."

Last month, State Bank of India, ICICI Bank, HDFC Bank, Punjab National Bank, Axis Bank, Bank of Baroda and several smaller players had all hiked their marginal cost of funding-based lending rates because of the liquidity squeeze. So it was only a matter of time that HDFC followed suit.

Ironically, banks are revising rates despite the Monetary Policy Committee deciding to keep the policy repo rate unchanged for the fourth consecutive time since August last year. So, with a recent a Morgan Stanley report projecting that the RBI will likely go for a hike in key policy rates by the fourth quarter of this year, one thing is for sure - loans are going to get more expensive here on.

(With PTI inputs)