HDFC to Raise Retail Lending Rates by 25 bps Effective March 1

HDFC Bank Q4 Results 2023

HDFC Announces Increase in Retail Prime Lending Rate for Housing Loans

India’s largest housing finance company, Housing Development Finance Corporation (HDFC), has announced a 25 basis point increase in its Retail Prime Lending Rate (RPLR) for housing loans. The rate increase, which affects the Adjustable Rate Home Loans (ARHL) benchmarked to the RPLR, will take effect from March 1, 2023. In a statement released to the press, HDFC also highlighted that it offers an adjustable-rate loan, also known as a floating rate loan, as well as a trufixed loan, which fixes the interest rate for a specific period before converting to an adjustable-rate loan.

The announcement follows the Reserve Bank of India’s (RBI) decision in February to increase the key benchmark policy rate by 25 basis points to 6.5 percent, citing sticky core inflation. This marks the sixth time the interest rate has been raised by the RBI since May last year, resulting in a total hike of 250 basis points. RBI Governor Shaktikanta Das, in his announcement of the bi-monthly monetary policy, stated that the Monetary Policy Committee (MPC) had raised the policy repo rate by 25 basis points and will keep a ‘strong vigil’ on the inflation outlook.

Despite the rate hike, Das noted that the policy rate at 6.5 percent still trails pre-pandemic levels, and core inflation is expected to remain sticky. The RBI has also projected India’s economic growth at 6.4 percent for 2023-24, while the National Statistical Office (NSO) estimates GDP growth at 7 percent for 2022-23.

As HDFC announces its rate increase, many homeowners may be impacted, and it remains to be seen how the RBI’s recent decisions will affect the housing market in India moving forward.

About HDFC:

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. HDFC Bank is a publicly held banking company, the bank was incorporated in August 1994 in the name of ‘HDFC Bank Limited’, with its registered office in Mumbai, India. It is engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations. It is promoted by HDFC Ltd. which has 19.32% stake as on September 30, 2020. Currently, HDFC Bank Ltd. (HBL) is the largest private sector bank in India.

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