HDFC, the country's leading mortgage lender, on Tuesday cut its lending rate by 15 basis points (bps), with effect from April 22, in wake of a gradual decline in cost of borrowing across the system. The decline in interest rate will benefit all existing HDFC retail home loan customers, the company said in a statement.
"HDFC reduces its Retail Prime Lending Rate (RPLR) on housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 15 basis points, with effect from April 22, 2020," the housing finance company said in a filing to the Bombay Stock Exchange.
Prime lending rate is the rate on which commercial banks lend to their most trustworthy and creditworthy customers. Following a 15 bps reduction in interest rate, HDFC's new rates will now range between 8.05-8.85 per cent.
The development came in line with similar steps by other banks, including State Bank of India (SBI), which slashed their lending rate to pass on Reserve Bank of India's rate cut benefits to borrowers.
The Reserve Bank of India (RBI), in its 7th bi-monthly monetary policy statement, on March 27 announced a 75 bps cut in repo rate along with 90 bps reduction in reverse repo rate to offset the impact of coronavirus pandemic on the economy. The cash reserve ratio (CRR) of all banks were also reduced by 100 bps to 3 per cent of net demand and time liabilities (NDTL) with effect from fortnight beginning March 28, 2020 for a period of one year.
SBI, the country's largest mortgage lender, is the only bank to pass the complete rate cut benefits to its borrowers by cutting its lending rate by 75 bps. The public sector lender slashed its interest rate to 7.05 per cent per annum from 7.80 per cent earlier. Similarly, SBI's linked lending rate was reduced to 6.65 per cent per annum from existing 7.40 per cent.
SBI was the first bank to link its loan products, including home loans, to an external benchmark. The public sector lender had chosen to use the RBI's repo rate as the benchmark for their home loans. Loan interest rates linked to repo rate are called repo linked lending rates (RLLR); SBI calls it external benchmark rate (EBR).
In a separate development, HDFC said it will be issuing secured redeemable Non-Convertible Debentures (NCDs) for Rs 1,250 crore with option to retain oversubscription upto Rs 3,750 crore on private placement. The issue opens for bidding on April 23, 2020 and closes on the same day. The object of the issue is to augment the long-term resources of the corporation. The proceeds of the present issue would be utilised for financing / refinancing the housing finance business requirements of the company.
By Chitranjan Kumar