After a number private sector banks raised their base rates, non-banking finance companies (NBFCs) have followed suit and started increasing their lending rates. Dewan Housing Finance Corporation (DHFL) announced a hike in its retail prime lending rate (RPLR) by 25 bps on Tuesday. Srei Infrastructure Finance also increased their benchmark rate by 50 bps to 18% from the existing 17.50% .
However, the increase in lending rates for DHFL is applicable only for loans above Rs 30 lakh. Srei Infra lends to large corporates for project financing and working capital, while DHFL largely lends to retail customers.
?In the very short term, borrowing costs have gone up. Also, banks are increasing their spreads on loans. Seeing these trends, we have had to pass the burden on to borrowers,? said Bijoy Daga, CEO of Srei Infrastructure Finance. Other NBFCs are considering a rate hike in the near future as well.
?The cost of funds have gone up significantly and hovering between 10% and 10.5%. Short-term funds are even touching 11%. So, we may also have to raise our lending rates, ? said VK Sharma, MD & CEO, LIC Housing Finance.
Last week, home loans from Housing Development Finance Corporation (HDFC) became more expensive as the housing major increased its retail prime lending rate by 25 bps to 16.65% last week.
For loans up to Rs 30 lakh, HDFC offers a 625-bps discount on the RPLR. And for loans above Rs 30 lakh, it offers a discount of 600 bps. Commercial vehicle financier, Shriram Transport also raised its lending rates on all fresh loans by 25-50 bps, across categories, starting August 1.
The Reserve Bank of India?s liquidity tightening measures have resulted in a spike in funding costs for most banks and NBFCs.
On Tuesday, the benchmark bond yield shot up to 8.735% despite RBI’s efforts to keep long-term yields in check by buying longer-dated securities from the market. While banks have the ability to raise deposits, NBFCs are mostly depended on borrowings from banks and raising funds from the market.
The top three private banks, ICICI Bank, HDFC Bank and Axis Bank, have all raised their base rates. ICICI Bank and Axis Bank raised their base rate by 25 bps each to 10% and 10.25%, respectively, while HDFC Bank raised its rate by 20 bps to 9.8%.