“HDFC increases its retail prime lending rate (RPLR) on housing loans, on which its adjustable rate home loans are benchmarked, by five basis points, with effect from May 1, 2022,” the company said in a statement.
One basis point is one-hundredth of one percentage point.
The move that will increase EMI for existing borrowers. Interest rates remain the same for new customers starting from 6.70% a year.
Interest rates have started moving up with the Reserve Bank of India signalling “less accommodative” monetary policy with gradual withdrawal of surplus liquidity injected during the height of Covid-19 pandemic. Inflation is expected to be high due to rise in global commodity prices including crude oil following the Russia-Ukraine crisis. RBI raised its inflation target to 5.7% in 2022-23, with first quarter 6.3%, second quarter at 5.8%, third quarter at 5.4% and fourth quarter at 5.1%.
The Consumer Price Index, which is a proxy to inflation for RBI, rose to 6.95% in March which is a 17-month high and is over the upper tolerance band of 6%. RBI is mandated to keep inflation at 4% with a band of two percentage points on either side.
Many expect the RBI to raise the policy rate in June to rein in inflation.