HDFC reduces housing loan rates

Dubai: Indian housing finance company HDFC on Wednesday announced a reduction in its retail prime lending rates (RPLR) by 50 basis points, effective Wednesday.

This is the second time in three months that HDFC has reduced its RPLR. With this reduction the RPLR has been brought down by 100 basis points since December 2008.

"We have been able to bring down our costs due to improved operational efficiency and good quality portfolio. HDFC continues to efficiently manage its liabilities and reprice its debts," said Renu Sud Karnad, joint managing director of HDFC Ltd.

The advantage of a cut in RPLR will accrue to all existing floating rate customers over the next three months based on their respective reset dates. Thousands of non-resident Indian customers in the UAE are expected to benefit from the reduction in housing loan rates.

The recent cuts in policy rates by RBI has created adequate liquidity in the banking system which had a positive impact on the cost of funds.

Explaining the rate cut Karnad said HDFC has always maintained a predetermined spread, and believes in passing on the benefits to the end users.

"In the current environment there is a time gap between the reduction in the marginal cost of funds and the portfolio cost. Marginal cost of borrowing had come down earlier this year and the same was passed on to our new customers through our special limited period offer [rates beginning at 9.5 per cent], we are now seeing a reduction in the costs on a portfolio level, and as in the past HDFC has ensured that the reduction in cost is passed on to existing customers by way of a reduction in RPLR."

HDFC has already reduced its deposit rates across maturities in the first week of March. On an incremental basis retail deposits for the first nine months, April 2008 to Dec-ember 2008, formed 55 per cent of HDFC's funding requirement .

HDFC loan approvals during the nine-month period ending December 31, 2008 amounted to Rs338.2 billion (Dh24.46 billion) against Rs293.76 billion in the corresponding period last year, representing a growth of 15 per cent.