HDFC's sub Gruh Finance to reduce dependency on bank borrowing | india | Hindustan Times
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HDFC's sub Gruh Finance to reduce dependency on bank borrowing

india Updated: Oct 24, 2010 12:47 IST

Gruh Finance, a home-loan lender, plans to reduce its dependence on bank borrowings on rising interest costs, a top company official said.

The subsidiary of HDFC Ltd, which recently raised its lending rates by 0.50 per cent, might consider a further hike this year end if borrowing costs increase, the official said.

"With the base-rate coming into play, it has become expensive to borrow from banks. We have, therefore, consciously decided to reduce our bank borrowings," Gruh Finance's Managing Director, Sudhin Choksey, told PTI in Mumbai.

The home finance entity has already reduced its banking funds to 18 per cent of its liability (from the earlier 40 per cent), he said.

Bank lending to Gruh Finance cannot be below the base-rate, a regime in effect from July, and hence, pressure on the company's borrowing costs is foreseen, Choksey said.

Its weighted average cost of borrowing as at September 30 was around 7.6 per cent but the average cost of incremental borrowing could rise above eight per cent to around 8.25 per cent going forward, he said.

Its interest rates now hover between 8.75 per cent and 12.75 per cent. "We might consider an increase by this year-end as we might be left with no choice but to pass on the increasing cost burden to our customers," he said.