Mumbai: Housing Development Corp. Ltd (HDFC), India’s largest mortgage lender, on Thursday raised lending rates by 20 basis points following Wednesday’s policy rate hike by the Reserve Bank of India. HDFC’s benchmark prime lending rate now stands revised at 16.65%, effective 1 August.
The housing finance company previously raised its lending rate on 4 June. HDFC has raised its borrowing costs by a total of 50 basis points this year. A basis point is one-hundredth of a percentage point.
For HDFC’s borrowers, home loans up to ₹ 30 lakh will now be available at 8.75% (8.70% for women) and those above ₹ 30 lakh will be available at 8.85% (8.5% for women).
While other lenders are yet to announce a lending rate hike, some banks have already started increasing deposit rates.
State Bank of India (SBI) on Tuesday raised its fixed deposit rates by up to 10 basis points, ahead of the monetary policy announcement. SBI is offering an interest rate of 6.70% on fixed deposits with maturity between one year and less than two years, up from 6.65% it was offering earlier.
HDFC’s decision to hike lending rates comes after RBI raised repo rate for the second straight time by 25 basis points to 6.5% on Wednesday.
Economists are not ruling out the possibility of more rate hikes this fiscal as RBI reiterated its intention to stick to the 4% inflation target and indicated upside risks to the target because of the larger-than-average increase in minimum support price for summer-sown crops and volatility in crude oil prices.
“Cost of funds have been stable for the last month despite increase in RBI policy rate. With the increase in lending rate, HDFC will see a positive impact on margins in the coming quarters. We had seen this quarter that (net interest margin) had declined by 50 basis points to 3.5%," said Ashutosh Mishra, banking analyst at Reliance Securities.
HDFC posted a 54% rise in net profit to ₹ 2,190 crore for the quarter ended 30 June compared with ₹ 1,424 crore a year earlier. Net interest income during the quarter rose 20% to ₹ 2,890 crore from ₹ 2,412 crore year earlier.
HDFC’s home loan book stood at ₹ 3.72 trillion at the end of June.
Shares of HDFC lost 1.9% on Thursday to close at ₹ 1,932.65, while the benchmark Sensex lost 0.95% to close at 37,165.16 points.