HDFC cuts home loan rates by 20 bps to 9.9%

After the lending rate cuts by banks, India's top mortgage lender, HDFC, has cut its home loan rate by 20 basis points (bps) to 9.9 per cent with effect from Monday. With this, the gap between the rates offered by HDFC and State Bank of India (SBI) on home loans has widened.

Earlier HDFC gave home loans at 10.10 per cent, while SBI charged 10.15 per cent. The country's largest bank is now offering home loans at 9.95 per cent for women customers and 10 per cent for others. In a statement, HDFC said the reduction in retail prime lending would benefit all customers and the reduction will also be applicable on loans to non-resident Indians (NRIs). HDFC also revised its deposit rates.

Keki Mistry, vice-chairman and managing director, HDFC, said interest margins would be protected despite the reduction in home loan rates. The home loan company has also slashed deposit rates by 20 bps. Mistry said the interest rates in the system could soften further. He, however, did not specify if HDFC would contemplate going in for another round of reduction. Earlier this week, SBI reduced its base rate or the minimum rate at which banks lend to customers. The move was followed by banks such as ICICI Bank and HDFC Bank cutting their base rates. With these cuts, home loan rates have also declined.

The rate cut decisions were taken by banks after the Reserve Bank of India (RBI) nudged them to do so. Meanwhile, HDFC also received an approval from RBI to raise external commercial borrowing (ECB) of up to $500 million. The approval is valid for a period of six months.

On ECBs, an HDFC executive said the company had just received approval and is yet to finalise details. It would benefit from reduction in spreads in the market and upgrading of the outlook on India’s sovereign rating by Moody’s to “positive” from stable. The spreads in international markets have come down by about 50 basis points in the past few months.

The corporation had posted a 12 per cent rise in net profit for the third quarter of FY15 at Rs 1,425 crore on the back of higher loan growth. As on December 31, 2014, the loan book stood at Rs 2.2 lakh crore, against Rs 1.9 lakh crore a year ago, growth of 14 per cent. Net interest margin stood at 3.93 per cent in the quarter under review, compared with 3.98 per cent in the year-ago period.