Taking loan from HDFC Bank is expensive, increased rates are applicable from today

Even before the central bank RBI (RBI) can increase policy rates this week, banks are deciding to increase interest rates. In the latest episode, taking loans from HDFC Bank, the country’s largest bank in the private sector, has become expensive. The bank has increased the marginal cost of based lending rates (MCLRs) by 35 basis points (0.35 per cent). This hike is for all tenured loans and the increased rates have come into effect from today (7 June). After the increase, now the MCLR of the bank’s loan has become 7.5-8.05 percent. The one-year MCLR is 7.85 per cent while it is 7.2 per cent in SBI and 7.4 per cent in PNB.

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Rates have increased in most banks

Last week, Punjab National Bank, ICICI Bank and Housing Development Finance Corporation (HDFC) decided to hike rates. Last month, the central bank RBI decided to increase the repo rate by 40 bps (0.40 per cent) on May 4 and since then most banks have increased the rates. Now the meeting of the MPC (Monetary Policy Committee) is to be held this week and it is expected that the repo rate may again increase by 25-50 bps (0.5-0.50 percent).

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Mixed effect of rate hike

Some analysts believe that the increase in interest rates may have an impact on the borrower’s ability to repay the loan. In its June 1 report, India Ratings and Research had said that the impact of the hike in interest rates may be negatively reflected on some borrowers and the situation may worsen if their income does not increase. On the other hand, banks have welcomed the hike in policy rates as it increased their pricing power which was under pressure for the last two years.

(Article: Shritama Bose)