HDFC Bank hikes lending rates, loans from India’s largest private lender to cost this much now across tenures

HDFC Bank has hiked its marginal cost of funds-based lending rates (MCLRs) by 35 basis points across tenures, even as the market awaits another imminent RBI policy rate hike later this week. The new rates will be effective from today (Tuesday, 7 June 2022). MCLRs on loans from India’s largest private lender will now range between 7.5% and 8.05%. The one-year MCLR at HDFC Bank stands at 7.85%, as against SBI’s 7.2% and PNB’s 7.4%.

Punjab National Bank, ICICI Bank and Housing Development Finance Corporation (HDFC) went for a fresh round of hikes in lending rates last week. Most lenders had raised rates after the monetary policy committee (MPC) hiked the repo rate by 40 bps on May 4.

The MPC’s June meeting is being held this week, with the policy statement expected on Wednesday. Markets expect the repo rate to be hiked by another 25-50 bps in the ongoing policy meeting. A fresh repo rate hike will result in an immediate repricing of external benchmark-linked loans given to retail and micro, small and medium enterprises (MSME) borrowers, as well as some corporates.

Some analysts are of the view that the regime of rising interest rates could affect some borrowers’ ability to pay. In a report dated June 1, India Ratings & Research said that the sensitivity of interest rate over aggregate demand has increased in a meaningful way. “Therefore, a faster and higher transmission of interest rate could become onerous for a section of the borrowers. The situation will aggravate if real income does not improve,” the report said.

Banks have welcomed the policy rate hikes as it has boosted their pricing power, which had come under pressure during the last two years.