HDFC, which is the country's leading housing finance company has reduced PLR or prime lending rate by 5 basis point. One basis point is one-hundredth of a percentage point. The move would benefit all of the existent customers of HDFC.
In a general case, this rate is the rate at which most trust-worthy individuals can avail home loan from financial institutions. Else, banks usually charge a spread over and above this rate depending on the person's financial credibility. Further, the rates also vary basis the loan tenure, credit amount sought, collateral deposited with the lender among other factors.
So, this primarily provides for the cost in case there arises default risk.
While the PLR is based on the repo rate that is decided time and again by the RBI, the central bank has been nudging the lenders to pass on the key rate cut benefit to end borrowers. So, despite the rate pause, banks have been cutting lending rates for quite some time now. New rates by HDFC come into effect from March 9, 2020.