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HDFC to cut lending rates - Views on News from Equitymaster
 
 
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  • Mar 7, 2000

    HDFC to cut lending rates

    Housing Development Finance Corporation (HDFC) is planning to cut its lending rates for housing loans following the recent rate cut by Housing and Urban Development Corporation (HUDCO). The rate cuts would be announced within a weeks time.

    HDFC (FY99 Total Income Rs 17.5 bn) is the largest housing finance company in India with a 55% market share. HDFC operates 41 offices and has a field force of more than 42,000 commission agents who mobilize retail deposits.

    HDFC is also considering merging its two loan slabs into a single slab. Currently it provides loans in two slabs upto Rs 1 m and above Rs 1 m. To increase the comfort of customers they are working out a single slab system.

    HUDCO's recent rate cut has been triggered off by the abolition of 2% on interest tax. HDFC has included this interest tax in the rate charged for housing loans and now plans to reduce the lending rates across the board hence passing on this rate cut to consumers.

    However it has not been clarified whether this interest tax cut would be applicable only to new loans or also to existing loans.

    HUDCO has reduced its rates by 200 basis points recently and may consider a further reduction only after the credit policy in April. This rate cut will trigger further rate cuts in the housing finance segments and would put pressure on the margins of these companies.

    Market View:
    HDFC has always been a favorite of analysts and fund managers as it has an excellent asset quality and a good management. The recent increase in FII limit from 30% to 40% will be beneficial to HDFC as the FII limit of 30% was exhausted for them.

     

     

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