As the RBI’s Monetary Policy Committee (MPC) last week raised key repo rates, banks have started raising their interest rate offerings for loans and deposits. Several lenders, including ICICI Bank, HDFC and Punjab National Bank, have raised their home loan interest rates.
Housing Development Finance Corporation (HDFC) has raised lending rates by 50 basis points. The new lending rate will come into effect from June 10, the mortgage lender said in a regulatory filing. “HDFC increases its Retail Prime Lending Rate (RPLR) on Housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 50 basis points, with effect from June 10, 2022,” it said.
ICICI Bank last week also increased its external benchmark lending rate by 50 bps to 8.60 per cent. “ICICI Bank External Benchmark Lending Rate” (I-EBLR) is referenced to RBI Policy Repo Rate with a mark-up over Repo Rate. I-EBLR is 8.60 per cent p.a.p.m. effective June 8, 2022,” the private lender said on June 9.
Bank of Baroda has also raised its interest rates on various loans linked with Baroda repo-linked lending rate (BRLLR), effective from June 9. “For Retail Loans applicable BRLLR is 7.40 per cent w.e.f. 09.06.2022 (Current RBI Repo Rate: 4.90 per cent +Mark-Up-2.50 per cent), S.P.0.25 per cent,” according to its website.
Punjab National Bank’s repo-linked lending rate (RLLR) has also been hiked and will now be 7.40 per cent, effective from June 9, while Bank of India also revised the rates. According to the Bank of India’s website, “The effective RBLR w.e.f from 08/06/2022 is 7.75 per cent as per the revised Repo rate (4.90 per cent).”
Last week, the MPC hiked the key repo rate by 50 basis points to 4.90 per cent to control inflation. It also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.
The RBI has also revised upwards by 100 basis points its retail inflation forecast to 6.7 per cent for the current financial year 2022-23, compared with the 5.7 per cent projected earlier. The retail inflation in April stood at an eight-year high of 7.79 per cent. However, the central bank has the mandate to keep it within 2-6 per cent.
Experts now believe that the MPC will go for more hikes in the coming months and the repo rate is likely to be at 5.75 per cent by the end of the current financial year.
Sunil Kumar Sinha, principal economist at India Ratings and Research, said that with the Russia-Ukraine conflict dragging on, the likelihood of elevated global commodity prices cooling off and supply-side disruptions coming to an end does not appear to be a possibility in the near term.
“Given the RBI’s inflation projection of 7.5 per cent in 1QFY23, 7.4 per cent in 2QFY23, 6.2 per cent in 3QFY23 and 5.8 per cent in 4QFY23, Ind-Ra believes there is still a possibility of another 25-50 bps hike in the policy rate in FY23 and the repo rate hike in this cycle could go up to 6 per cent,” Sinha added.
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