HDFC to hike lending rate by month-end

Home loan provider raised its PLR by 50 bps to 11.75% in May.

The largest domestic home loan provider, Housing Development Finance Corporation (HDFC), is likely to increase its lending rates again by the end of this month.

HDFC raised its PLR (prime lending rate) by 50 basis points to 11.75 per cent in May, which was the second hike in 2006. In February, it had raised its PLR by a similar margin.

"There is a substantial rise in cost of borrowings, which is forcing us to review the lending rates. We will take a view on lending rate revision by the end of this month," Chairman Deepak Parekh told reporters after HDFC's annual general meeting here today.

The cost of 10-year funds for HDFC has gone beyond 9 per cent, up from 8.75 per cent in March 2006 and 7.8 per cent in January.

"The cost of funds has gone up and also there are concerns over availability of resources from banks as the banking system faced a slower growth in deposits during April-June 2006," he said.

HDFC does not see any need for raising deposit rates again now. There was a slight decline in deposit growth in the earlier part of the first quarter, but subsequently it picked up.

The leading mortgage lender's cost of total funds at the end of June 2006 was 8 per cent, 25 basis points more than the level witnessed during the January-March 2006 quarter.

Parekh said HDFC's performance in the first quarter of 2006-07 was in line with the management's expectation of growth trend.