HDFC Bank hikes lending rate by 50 bps

HDFC Bank today hiked its prime lending rate (PLR) by 50 basis points to 11.50 per cent with effect from June 14.

The second largest private sector bank changed its PLR after nearly two-and-a-half years, while the biggest private sector bank, ICICI Bank, raised its PLR five times to 13.25 per cent.

HDFC Bank also raised interest rates on term deposits by 25-50 basis points across various maturities. One basis point is one hundredth of one per cent.

"The recent 25 basis points hike in reverse repo rate by the RBI influenced the bank's decision to review the rates. Bond yields and revision in rates by other banks have also been factored in," Paresh Sukhtankar, country head (credit & market risk), said.

The RBI hiked reverse repo and repo rates by 25 basis points each last week to 5.75 per cent and 6.75 per cent, respectively. The central bank raised the short term rates five times in the last 20 months.

HDFC Bank does not provide home loans. It only offers home loans on behalf of its parent and home mortgage leader, Housing Development Finance Corporation (HDFC).

"Wholesale loan rates will go up as most of these loans are linked to the PLR, but the demand for loans won't be affected," Sukthankar said.

"All the money market rates "" the commercial papers, short-term corporate loan, call rates, bond yields have gone up," Sukthankar said.

The bank's loan book comprises 55 per cent retail loans and rest corporate loans. HDFC Bank's cost of deposits was 3.3 per cent and its net interest margin was 3.9 per cent as on March 31, 2006.