HDFC Bank set to hike lending rates
Two days after the Reserve Bank of India raised key short-term rates; HDFC Bank on Thursday became the first major lender in the country to announce a plan to raise lending rates, which will make home and car loans expensive.
“There will be an increase in lending rates, both in retail and corporate sides. Most retail products, including auto loans, will see an increase in the next few days,” said Paresh Sukthankar, executive director, HDFC Bank, admitting that rate hike will affect demand for retail loans.
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“Higher ticket loans will attract higher EMIs as lending rates increase. This will lower retail demand for higher level loans,” he said.
During the October-December quarter, HDFC Bank reported a 36 % increase in its auto loan portfolio, which stands at Rs 24,600 crore.
Though other banks maintain that there is an upward bias in interest rates, they have not said when the rates would go up. Apart from new loans, banks are also expected to raise interest rates on exiting loans.
The RBI had raised its short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points to 6.5 % and 5.5 %, respectively, on Tuesday to contain inflation.
But even as lending rates rise, HDFC Bank may not raise deposit rates in a big way. Sukthankar said the bank had increased deposit rates in the beginning of the month and it had surplus liquidity for credit growth. “There will be no major increase in deposit rates. Even if it happens, it would be marginal,” he said.
On January 1, HDFC Bank had raised interest rates on retail term deposits by up to 1.25 percentage points depending on maturities.
In the third quarter, HDFC Bank’s advances grew by 32 % to Rs 1,67,000 crore. Out of that, retail advances grew by 34 % while corporate or wholesale advances grew by 29 %. Deposits increased by 24 % Rs 1,92,000 crore.
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