17th July 2019, 11:50
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| | Re: Help with a home loan!
So had raised a query with HDFC wrt to home loan interest rates not moving in direction with RBI and below is what i got in writing.
One need not be a financial whizkid to understand that all they care for are profits. Who regulated these So called NBFC and how can we force them to follow RBI guidelines. I am thinking of filling a RTI to RBI to see their response. They cannot hide behind the free market and let these banks have free run at a time when govt is busy promoting Affordable housing.
Thank you for writing to us. We appreciate your directly bringing to us your concerns. |
We would like to briefly inform you about certain nuances governing your Rate of Interest.
A variable rate home loan ("ARHL") is typically governed by the twin principles of the HDFC Retail Prime Lending Rate and the Spread – reflecting a combination of multiple long term and short term factors prevailing in the economy.
HDFC’s Retail Prime Lending Rate (RPLR) is the benchmark rate for its retail home loans and is based on the cost of funds, operating expenses, cost of regulatory provisioning/capital charge and profit margins and reflects changes in any or all of these from time to time.
The other component of the Rate of Interest i.e. the Spread depends upon a number of factors assessed at the time of availing of the loan such as, the type of loan and product being financed, risk perception vis-à-vis the customer and the product, marginal cost of funds, tenure of the loan, past and expected trends in the performance of the portfolio etc. At the time when the loan is first disbursed, the Spread is fixed by taking into consideration the factors mentioned above and is contractually agreed upon in the Loan Agreement executed between the customer and HDFC.
It is important to note here that the home loans provided by HDFC are largely in the nature of long term finance with repayment periods spanning over multiple years, most time over decades.
The Repo rate is the rate at which the Reserve Bank of India (RBI) lends to banks and is indicative of the rate available for banks to borrow or lend money for short tenors, most typically overnight. As of now, Housing Finance Companies (HFCs) do not have access to the repo rate linked money markets.
The RPLR has continued to be dynamic and has fluctuated in consonance with market trends. The movement in RPLR is not isolated from regulatory intentions and has extensively protected the interests of our borrowers by fluctuating largely in synchrony with the applicable rates in the economy, including but not limited to the repo rate.
[Option to Convert Spread:
In the event, HDFC offers a revised spread on ARHL, the customer can opt for the revised spread with prospective effect in respect of the loan by payment of conversion fees applicable from time to time. The conversion fee is charged to offset the mismatch on the interest differential between our cost of liabilities and the assets. In a changing interest rate scenario, while the assets may get repriced, there is a lag for repricing the liabilities and hence, a nominal fee is charged to offset this differential.
It is pertinent to mention here that, unlike a lot of other institutions, HDFC offers flexibility in terms of the ARHL agreement to its customers wanting to opt for a revised spread from what was originally contractually agreed and settled. This enables an existing customer to re-price the loan from an existing higher Applicable Rate of Interest owing to a lower negative Spread to a lower Applicable Rate of Interest by choosing a higher negative Spread. This flexibility requires HDFC to re-price its liabilities and comes at a cost to the customer, termed as conversion fee. Therefore, you will kindly appreciate that this fee for a spread change is based on a valid transparent and fair commercial rationale and the sameis devoid of any unfairness and / or arbitrariness.]
We hope we have addressed your concerns to your satisfaction and we look forward to mutually beneficial relationship with you in times to come.
Assuring you of our best services always,
Last edited by .sushilkumar : 17th July 2019 at 11:53.