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Home finance major HDFC reduced home loan rates by 50 basis points for all its existing floating rate customers. HDFC also said that it will charge 10.25 percent of interest annually from new applicant for a loan of Rs 20 lakh or less. And for loans of more than Rs 20 lakh, it will charge interest at 11.25 percent. The bank also reduced the interest rate on deposits that it accepts from the public by 50 basis points. In a statement to the media, HDFC informed that all the changes will come into effect from December 22.
HDFC was able to bring home loan cuts because the government and RBI had taken series of measures to infuse liquidity into the economy. Over the last three months, RBI has cut key policy rates, including cash reserve ratio, repo and reverse repo rates, and statutory liquidity ratio. Government has also infused money into the housing sector through the National Housing Bank. PSU banks are also forced to cut rates for new home loans up to Rs 20 lakh.
Although in the past few weeks several banks cut home loan rates, but those decisions applied only to new customers. HDFC is the first major housing lender to cut rates for both current and new customers. While commenting on this matter, Keki Mistry, HDFC vice chairman and MD said that the bank was able to exercise the move especially because of the recent reduction in the cost of funds. The wholesale funding rate has declined from October-November levels hence HDFC decided to pass on the benefits to its customers, both old and new ones.
