HDFC-HDFC Bank Merger: The Big Move That Could Save You Thousands on Your Home Loan!

What changes will HDFC home loan borrowers face with the HDFC-HDFC Bank merger? Could home loan interest rates go down? Get the exclusive report now to find out!

HDFC-HDFC Bank Merger
  • HDFC home loan borrowers' interest rates will be linked to an external benchmark within six months.
  • The shift to EBLR will ensure transparency and accountability in the loan pricing system.
  • The merger is expected to lead to lower costs and increased customer benefits.

HDFC Bank and HDFC are set to merge, creating a new financial behemoth. But what does this mean for HDFC home loan borrowers? The merger could have several implications for borrowers, including changes to interest rates, fees, and terms. It's important to understand what these changes could be so that you can make informed decisions about your home loan.

In this article, we'll take a closer look at the HDFC-HDFC Bank merger and what it could mean for home loan borrowers. We'll discuss the potential changes to interest rates, fees, and terms, as well as what you can do to prepare for the merger.

The burden on home loan borrowers: How will it impact?

HDFC's home loan portfolio will be transferred to HDFC Bank, meaning that withing the next six months, the interest rates of HDFC's home loan borrowers will be connected to an external benchmark. Unlike banks, non-banking finance companies (NBFCs) are not required to link their retail loans to an external benchmark. However, as per the RBI directive from October 2019, banks must link the interest rates on all floating-rate retail loans to an external benchmark, which can be the RBI's repo rate, 3-month treasury bill, 6-month treasury bill, or other market-linked benchmarks published by Financial Benchmarks India Pvt Ltd (FBIL).

Banks in India are transitioning from an internal benchmark rate, the Benchmark Prime Lending Rate (BPLR), to an external benchmark rate, the External Benchmark Lending Rate (EBLR), as determined by the Reserve Bank of India (RBI). This change will make loan interest rates more transparent and responsive to market developments. The shift to EBLR will ensure that the benefits of rate reductions are passed on to borrowers promptly and efficiently, increasing transparency and accountability in the loan pricing system.

Is there any benefit of linking interest rates to EBLR?

Lending entities in India need to be faster to transmit loan rates when there is a drop in the repo rate, as loan rates are not directly linked to the External Benchmark Lending Rate (EBLR). To pass the full benefit to borrowers, banks must offer EBLR linked to the repo rate, according to the Reserve Bank of India. Amar Ranu, Head of Investment Products & Advisory at Anand Rathi Shares & Stock, made the statement.

Are there going to be changes in home loan terms? Will HDFC home loan borrowers be required to sign a new mandate for EMIs?

There is a low probability of any modifications to the current loan terms and conditions, and borrowers will be expected to pay their EMIs under their current repayment schedules.

Ankit Jain, Partner at Ved Jain & Associates, stated that whether a new bank mandate will be necessary is currently being determined. He believes that HDFC Bank will try to avoid causing inconvenience to its borrowers and come up with a solution to continue debiting EMIs without requiring a new mandate.

Can home loan interest rates go down, post HDFC Bank and HDFC merger?

Banks with significant deposits in Current Accounts and Savings Accounts (CASA) usually have lower costs of funds. According to Kamal Aggarwal, Senior Advisor at Singhania & Co LLP, HDFC Bank could take advantage of this and potentially extend customer benefits by borrowing more funds at lower interest rates. The decision to benefit new or existing customers would depend on management.

Existing HDFC home loan borrowers may benefit from the HDFC twins' merger if HDFC Bank reduces home loan interest rates or provides other advantages. As per Kaushal Agarwal, Chairman of The Guardians Real Estate Advisory, if the interest rates decrease due to the transition to EBLR, the loan tenure of home loan borrowers may decrease as well, depending on the reduction in home loan rates.

It is hard to predict whether the Bank will reduce interest rates. If the interest rates are reduced, what would be the quantum is hard to guess. There is a high probability that the merger will lead to improved customer service and better product offerings, according to Mr Agarwal from The Guardians Real Estate Advisory.

How will the home loan borrowers of HDFC claim income tax benefits?

The merger of HDFC and HDFC Bank has created some confusion regarding tax benefits for home loan borrowers. Some experts believe borrowers can claim tax benefits as usual, while others believe borrowers may have to submit separate details for each entity. The exact details are still unclear, and borrowers are advised to wait for further clarification from the authorities.

Also ReadHDFC-HDFC Bank merger: How will it impact your mutual fund investments?

How will home loans of HDFC Bank be impacted post-HDFC Bank-HDFC merger?

The merger of HDFC Ltd and HDFC Bank will have several implications for existing customers. One of the implications is that the commission charged for cross-selling loans may be waived, which could save customers money. Additionally, the GST implications of cross-selling may also be eliminated. Another implication of the merger is that there may be changes to the terms and conditions of existing loans. However, these changes are expected to be staggered, so customers will have time to adjust.

Overall, the merger of HDFC Ltd and HDFC Bank is a positive development for customers. It is expected to lead to lower costs and more convenience for customers.

Also Read: What does the HDFC-HDFC Bank merger mean for shareholders?

HDFC's home loan portfolio will be transferred to HDFC Bank, and borrowers will have their interest rates linked to an external benchmark within six months. The shift to an external benchmark will increase transparency and accountability in the loan pricing system. There may also be potential customer benefits, such as reduced loan interest rates and improved product offerings, but the details still need clarification.


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