Mortgage financier Housing Development and Finance Corporation (HDFC) raised its lending rate for borrowers by 35 basis points (bps) early Tuesday. This is the second hike in a week. A basis point is one hundredth of a percentage point.
On June 1, the Retail Prime Lending Rate (RPLR) on home loans, the benchmark gauge for home loans to borrowers, was raised by 5 basis points.
HDFC and other financial institutions are steadily raising interest rates following an increase in the repo rate and cash reserve ratio (percentage of banks’ total deposits held with the Reserve Bank of India (RBI) )) by 40 basis points and 50 basis points, respectively, last month.
At an out-of-round Monetary Policy Committee (MPC) meeting, the RBI raised the benchmark repo rate, the short-term lending rate it charges banks, by 0.40% to 4.40 % in order to control the surge in inflation.
Speaking to CNBC-TV18 on May 23, RBI Governor Shaktikanta Das said, “RBI would like to increase the tariffs in the next meetings or at least the next meeting.”
“I said that one of the reasons for the off-cycle meeting in May was that we didn’t want much stronger action in June, which is completely avoidable… The expectation of a rate hike is a given, there will be some increase in repo rates, but by how much I can’t say now,” Das said last month.
Additionally, a recent CNBCTV-18 poll showed that the majority of 10 economists surveyed see a half-percentage-point hike in the repo rate in June. In the survey, half of respondents expect a 50 basis point hike in the repo rate in the June 8 policy, and the other half expect an increase of between 25 and 50 basis points.
It comes as the RBI’s monetary policy committee is expected to announce its policy decision at 10am on June 8. Another 40 basis point hike in the repo rate is expected after the June 2022 policy meeting.