HDFC Bank hikes home loan interest rates by 10-15 bps to 9.8 percent

HDFC Bank, India’s largest private sector lender, increased its repo-linked home loan interest rates by 10-15 basis points to a range of 9.2 percent to 9.8 percent in March, following its merger with HDFC.

According to information on the bank’s website, the change in the rate is due to the merger of HDFC Bank and HDFC on July 1, 2023, and it will no longer be linked to the retail prime lending rate (RPLR).

“The applicable rate of interest to a customer’s account shall now be linked to EBLR (external benchmark lending rate) instead of RPLR. This is in compliance with the regulatory guidelines on floating rate of interest. On the day of the merger there will be no change in rate of interest (ROI) and any changes in future will be based on EBLR,” the bank said on its website.

The repo-linked lending rate is tied to the Reserve Bank of India’s repo rate, which has been kept unchanged at 6.50 percent since April 2023 after inflation showed signs of moderating. The Monetary Policy Committee steadily increased the repo rate by 250 bps starting in May 2022.

home loans

Additionally, the bank said that the new repo linked interest rate is applicable to new customers.

One basis point is one-hundredth of a percentage point.

Additionally, experts said the hike in rates could be due to the change in spread. The spread is calculated based on the borrower’s credit score, income source, and loan size.

“Change in repo rate-linked rates can be linked to the spread, which is calculated during the time of giving the loan. Banks do not change the spread in the interest rate often but the same is up to the bank,” said Vijay Singh Gaur, lead analyst at CareEdge.

Other banks

Some other major private and public sector banks offer home loans at interest rates ranging from 8.70 percent to 10.05 percent.

Interest rates for home loans with ICICI Bank range from 9 percent to 10.05 percent, which is valid till March 2024. The home loan interest rates State Bank of India, the country’s largest bank, ranges from 9.15 percent to 10.05 percent. Axis Bank’s interest rates on home loans range from 8.75 percent to 9.65 percent and Kotak Mahindra Bank’s interest starts at 8.70 percent.

All interest rate information was taken from the websites of the respective banks.

Moneycontrol reached out to HDFC Bank, SBI, Axis Bank, ICICI Bank and Kotak Mahindra Bank via email but they did not comment on home loan rates.

Will banks hike lending rates?

In October 2023, RBI governor Shaktikanta Das said the 250-bps increase in the policy repo rate — currently 6.50 percent — wasn’t fully reflected in bank lending and deposit rates.

“The transmission of the 250-bps increase in the policy repo rate to bank lending and deposit rates is still incomplete,” Das said at the time. “Hence, the MPC decided to remain focused on withdrawing accommodation. The MPC remains highly alert and prepared to undertake timely policy measures, as necessary, to align inflation with the target and anchor inflation expectations.”

The six-member MPC of the RBI will meet from April 3 to 5 to decide on interest rates. A Moneycontrol poll of 21 economists and bankers showed that the RBI is likely to maintain the status quo while remaining cautious on inflation.