INDIA BUSINESS WORLD - FEBRUARY 1st - FEBRUARY 15th - 2008
HDFC SLASHES PRIME LENDING RATE (PLR) BY 25 BPS
HDFC has cut its prime lending rate (PLR) by 25 basis points—the first reduction in its benchmark rate in four-and-a-half years. The move will benefit around 8 lakh existing borrowers of the country’s largest housing finance company who have availed floating rate loans.
Following the cut, the bank’s retail PLR stands at 13.75%. Over 90% of borrowers are now on floating rates. For a borrower with a Rs 10-lakh outstanding loan and 10-year residual term, it amounts to savings of Rs 150 on the monthly installment.
Said HDFC joint managing director Renu Sud Karnad, “We have been able to bring down our costs due to improved operational efficiency and good quality portfolio, and as always, have ensured that it translates into a benefit for the customers. While we were able to offer our new customers a special rate of interest since June ’07 because of good liquidity conditions, our existing customers were not able to enjoy the benefit.”
HDFC had last lowered its PLR in July ‘03 when it cut its retail benchmark to 9.75%—the lowest in its history. Since then, the retail PLR had risen steadily to 14%.
The latest PLR revision seems to indicate that the institution sees the markets moving to a softer interest rate cycle.
Meanwhile, ICICI Bank said it was not revising its lending rates but was constantly reviewing its cost of funds to see if there is a scope to reduce rates.
The RPLR cut will benefit all existing floating rate customers over the next three months based on their respective reset dates. As for new home loan customers, HDFC’s interest rate under the Adjustable Rate Home Loan (ARHL) continues to be at 10.25% pa.
A buoyant economy, stable industrial growth and adequate liquidity in the banking system over the past six to nine months have had a positive impact on the cost of funds, against which HDFC benchmarks its lending rates. The company has always maintained a pre-determined spread, and believes in passing on the benefits to the end users, an HDFC statement said.
The company has continued to show robust growth in its loan approvals and disbursements. Loan approvals during the nine-month period ended December 31, 2007 amounted to Rs 29,376 crore as against Rs 22,666 crore in the same period last year—a growth of 30%. Loan disbursements in the same period totalled Rs 22,285 crore as against Rs 17,465 crore, a 28% increase.
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