Mumbai: Bringing some relief to millions of its borrowers, HDFC, the country's biggest mortgage lender, on Tuesday cut its lending rates on home loans by 0.5 per cent to 14 per cent effective from Wednesday.
With Tuesday's reduction, HDFC's Retail Prime Lending Rate (RPLR) stands reduced at 14 per cent. The lender has lowered its RPLR by one per cent since December last year.
"We are now seeing a reduction in the costs on a portfolio level and as in the past HDFC has ensured that the reduction in cost is passed on to existing customers by way of a reduction in RPLR," HDFC Joint Managing Director Renu Sud Karnad said.
The move will benefit all existing floating rate customers of HDFC and will accrue to them over the next three months based on their respective reset dates, HDFC said in a statement on Tuesday.
After the Reserve Bank cut its short-term lending and borrowing rates by 0.5 per cent each recently, many leading state-owned lenders and a few private sector banks had reduced their lending rates to pass on the benefit of the RBI cuts to their customers.
These banks include State Bank of India, Central Bank, Union Bank of India, Bank of India and ICICI Bank.
Heeding to the apex bank's call to cut lending rates, SBI and Central Bank had frozen its home loan rate at eight per cent for a period of one year, followed by a few private sector lenders, including India's second largest ICICI Bank.
Announcing the rate reduction today, Karnad said that HDFC has seen its costs declining, primarily owing to improved operational efficiency and a good quality portfolio.
Also, the recent reduction in Reserve Bank's policy rates has created adequate liquidity in the banking system, which had a positive impact on the cost of funds, Karnad said.
"HDFC continues to efficiently manage its liabilities and reprice its debts. In the current environment there is a time-gap between the reduction in the marginal cost of funds and the portfolio cost," Karnad said.
The recent monetary and fiscal actions coupled with correction in propoerty prices have resulted in an increased interest from first-time house buyers in the recent past, Karnad said.
HDFC has also reduced the lending rate on existing loans to Non-Resident Indians (NRIs).
Early this month, HDFC had reduced its deposit rates across different tenures. On an incremental basis, retail deposits during April-December, 2008, formed 55 per cent of HDFC's funding requirements.
HDFC's loan approvals, during the April-December 2008 period, amounted to Rs 33,820-crore, up 15 per cent, as against Rs 29,376-crore in the year-ago period.
Total loan disbursements, during this period, stood at Rs 27,211 crore, up 22 per cent, as against Rs 22,285 crore in the year-ago period.
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