HDFC Bank hikes lending rates by 35 bps across tenures

HDFC Bank has hiked its marginal cost of funds-based lending rates (MCLRs) by 35 basis points (bps) across tenures. The new rates come into effect on Tuesday.

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%, against State Bank of India (SBI)’s 7.2% and Punjab National Bank (PNB)’s 7.4%.

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

The MPC’s June meeting is being held this week, with the policy statement coming on Wednesday. Markets expect the repo rate to be hiked by another 25-50 bps in the ongoing policy meeting. A fresh hike will result in an immediate re-pricing 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 the sensitivity of the 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 borrowers. The situation will aggravate if real income does not improve,” the report said.

Banks are for now happy with the policy rate hike as it has boosted their pricing power, which had come under pressure during the last two years.

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