Housing Development Finance Corp (HDFC Ltd), the country’s largest mortgage lender, is considering a plan to link interest rates to external benchmarks, although the Reserve Bank of India (RBI) hasn’t mandated this for housing finance companies (HFCs).
The home financier is looking to link both loans and liabilities as this will protect interest margins, HDFC vice chairman Keki Mistry told ET. For liabilities, it may engage in aggressive trades in interest-rate swaps, a market mechanism in which a trader exchanges fixed-rate payments for floating rates.“We will still examine such loan products in our next asset liability committee (ALCO) meeting to be held in the next two weeks,” Mistry said. “We would come up with external benchmark-linked loan products only when we are able to match the same mechanism on our liabilities side.”