Days after the Reserve Bank of India (RBI) announced a 40 basis points (bps) repo rate hike, the Housing Development Finance Corporation (HDFC) on May 7 declared an increase in its retail prime lending rate (RPLR) by 30 basis points with effect from May 9, 2022.
The move will impact all existing customers, who would see an upward revision in their loan rates by 30 bps. One bps equals 0.01 percentage point. The rate for new customers is also likely to go up owing to this change.
Repo rate is the rate at which the RBI lends money to all commercial banks. An increase in repo rate translates into a hike in the lending as well as deposit rates.
The rate hike comes after the country’s largest mortgage lender increased its RPLR by 5 bps on May 2. The interest rates are likely to go up as the RBI now hints at withdrawing the accommodative monetary policy to rein in inflation.
Last month, the State Bank of India (SBI) had increased the marginal-cost of lending rate (MCLR) by 10 bps from 7 per cent to 7.1 per cent across tenor.
The MCLR is the benchmark interest rate, which is the minimum rate at which banks are allowed to lend. Most loans are linked to the one-year MCLR.
Axis Bank has hiked its MCLR by 5 bps, while Kotak Mahindra Bank has increased its MCLR by 5 bps to 7.4 per cent.
In the last month, Bank of Baroda, too, increased its MCLR by 5 bps.
In the previous month, HDFC had also announced the approval from its board for the merger of its wholly-owned subsidiaries, HDFC Investments and HDFC Holdings, with HDFC Bank. HDFC will acquire 41 per cent stake in HDFC Bank through the merger. “This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others,” Deepak Parekh, chairman of HDFC has said of the merger.
Now, other banks and lending institutions are also expected to increase the rate of interest on home loans.