HDFC Bank hikes rates by 0.5%; loans to become dearer
Private sector lender HDFC Bank today raised its benchmark lending rate by 0.50 per cent to 16.25 per cent, making auto, home and commercial loans more expensive.
"Our cost of funds has been rising in the last two months and we felt that this was the right time to hike our BPLR," a bank official told PTI, adding that the new rates would come into effect from today.
HDFC Bank's decision to raise the Benchmark Prime Lending Rate (BPLR), which is the benchmark rate for auto, home and commercial loans, follows similar moves by market leaders like like State Bank of India and ICICI Bank and other smaller players. The hike in the BPLR by HDFC Bank will also have implications for borrowers who had taken loans at a floating interest rate.
The banks have been raising lending as well as borrowing rates after the Reserve Bank of India (RBI), in its last review of the monetary policy review on July 27, hiked the short-term borrowing (reverse repo) rate by 50 basis points and the lending (repo) rate by 25 basis points to tame inflation.
The RBI is likely to take more steps in its mid-quarter review of the monetary policy on September 16, as inflation is still high at 9.97 per cent. On the liquidity situation, the HDFC Bank official said presently it was comfortable, "but come mid-September with advance tax payments to be made, there could be a tightening of liquidity conditions."
There has been a slowdown in accretion of deposits in the industry and hence, he said there could be an upward bias on the cost of deposits.
HDFC Bank has already increased its deposit rates twice this year -- in February and in July -- to mop up additional funds. SBI and ICICI Bank last month raised their benchmark lending rates by 50 basis points each, making home, auto and corporate loans costlier.
Besides the market leaders, several other lenders, including Punjab National Bank, Bank of Baroda, Bank of India, Oriental Bank of Commerce and Canara Bank had raised their BPLRs by up to 50 basis points. At the same time, many banks increased deposit rates as well.
