HDFC Bank raises PLR by 50bps to 11.50%

HDFC Bank today hiked its prime lending rate (PLR) by 50 basis points to 11.50% 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%.

HDFC Bank also raised the interest rates on term deposits by 25-50 basis points across various maturities. One basis point is one hundredth of 1%.

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

The RBI hiked reverse repo and repo rates by 25 basis points each last week to 5.75% and 6.75% 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% retail loans and rest corporate loans. HDFC Bank's cost of deposits was 3.3% and its net interest margin was 3.9% as on March 31, 2006.