HDFC says demand for home loans is picking up

According to a banker who had attended the meeting of the Finance Minister and PSU bank chiefs said that the finance ministry as well as the Reserve Bank of India wanted a steep fall in lending and deposit rates because it is believed this will cover RBI interest rate curve, which is one of the reason for the absence of the strong pick-up in the credit demand.

The banker informed private and foreign banks have reduced lending as they have become cautious and risk reluctant, whereas the force of increasing the loans growth and meeting credit needs of the corporate sector is being endured by state-owned banks.

However the finance ministry and RBI officials have been advising the banking sector to pass on the benefits of lower interest rates to customers. After the meeting with Pranab Mukherjee, a few banks such as State Bank of India, Union Bank of India, ICICI Bank, IDBI Bank and HDFC Bank reduced their deposit and loan rates.

Housing Development Finance Corporation (HDFC), India’s leading housing finance lender, too had slashed its deposit rates by 25 basis points (0.25%) after the FM-bankers meet but has not taken any decision on reducing lending rates in the near future. Earlier the housing finance lender had reduced its lending rates on May 7 by 0.25% after bringing it down by 0.50% in March. At present the institution is waiting for directions on interest rates from Budget 2009-10 as well as Reserve Bank of India's credit policy review will be presented in July before moving on loan rates.

Recently Deepak Parekh, chairman, HDFC, informed that interest rates will be reviewed only after decline in cost of funds. Currently HDFC is charging 9.25% for loans up to Rs 30 lakh, 9.75 for loans between Rs 30 lakh and Rs 1 crore and 10% for loans above Rs 1 crore.

Sources at HDFC told UTVi that recently demand for housing is picking up substantially as against to what was seen in the last quarter of 2008. There has been increase in loan approvals in June which have exceeded the May numbers of the institution, as per the information provided by sources. The leader in housing finance is also likely to maintain growth in net profit for the current financial year at 20%. In the previous financial year, HDFC had registered a profit of Rs 2,268 crore, up 24% in comparison to the previous fiscal. The lender had approved around Rs 49,166 crore while disbursals amounted to Rs 39,650 crore in 2008-09.