Buy HDFC Ltd : Raises Retail Prime Lending Rate on Housing loans by 50bp By Motilal Oswal
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Raises Retail Prime Lending Rate on Housing loans by 50bp
* HDFC has raised the Retail Prime Lending Rate (RPLR) on Housing loans by 50bp, with effect from 10th Jun’22. RPLR is the floating rate on which Home loans are benchmarked. This is the fourth such increase in RPLR since 1st May ’22. HDFC has now cumulatively increased the RPLR by 90bp. This suggests that, within Home loans, the increase in the interest rate is in line with the increase in the repo rate and is faster than other product segments.
* With this 50bp increase, the RPLR will increase to 16.95%. This will translate into the lowest special home loan rate of 7.55% (potentially for salaried women borrowers with high CIBIL score and loan amount of <INR3m). We now expect HDFC’s special home loan rates (for any loan amount) to range between 7.55-8.05%. The highest home loan rate will potentially now be 8.55% (for self-employed male customers with ticketsize above INR7.5m)
* As at Mar’22, 85% of the total assets and 84% of the total liabilities were on a floating rate basis
* HDFC enters into INR interest rate swaps to manage the risk arising from the mismatch on account of floating rate loans forming bulk of the assets, and fixed rate borrowings forming a large portion of liabilities.
* As at Mar’22, HDFC has entered into such swaps for converting its fixed rate rupee liabilities of a notional amount of INR1.45t for varying maturities into floating rate liabilities linked to Overnight Index Swaps and yields on government securities. As a result of the swaps, HDFC pays the floating rate and receives the fixed rate.
* ICICIBC had on 8th Jun’22 raised its external benchmark linked lending rate by 50bp, with a cumulative increase of 90bp since 5th May’22 when RBI started increasing its policy repo rate.
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