Early last month, HDFC was offering home loans to its top customers at 6.7%. The company raised rates by 30 basis points (100bps = 1 percentage point) after the central bank did an off-cycle rate hike on May 4. Beginning of June, it again raised rates by 5bps following an increase in interest rates in the system. According to HDFC officials the increase in rates were unlikely to impact demand as home loans continue to be 50-60bps below the pre-pandemic level.
The latest round of increases comes in the wake of the RBI increasing the repo rates by 50bps to 4.9% on Wednesday. Responding to the RBI action, ICICI Bank on Thursday said on its website that its external benchmark lending rate (EBLR) is referenced to the RBI policy repo rate with a mark-up. The EBLR is now 8.6% effective June 8.
In the private sector, RBL Bank‘s repo-linked lending rate shot up to 10% after a 50bps increase. Federal Bank said that its best home loan rates are now 8.55% – an increase in line with the RBI policy rate movement.
Consultancy firm The Guardians Real Estate Advisory’s chairman Kaushal Agarwal said, “The rise in property prices due to the increased interest rates, metro cess and higher stamp duty has not affected sales in the past couple of months, which proves that there is a genuine demand. The move to hike the repo rate might temporarily limit the growth momentum of the sector, but the demand will continue to sustain.”
Retail borrowers will be the most hit by the increase in lending rates as corporates have deleveraged and have less loans on their books than before. As against this, retail borrowings have increased. According to data released by the RBI, non-food bank credit has increased by Rs 76,460 crore in April. The increase was driven by personal loans, which grew by Rs 57,166 crore. The other sectors that grew were agriculture, MSMEs, trade and non-banking finance companies.
Total outstanding in the personal loan segment is now at Rs 34.4 lakh crore, half of which is housing. As against this, loans to industry stands at Rs 31.5 lakh crore, of which large industry is Rs 23.9 lakh crore. In percentage terms, the fastest growing segment in April this year was credit card outstandings, which jumped 4% to Rs 1.53 lakh crore from Rs 1.47 lakh crore in end March.