The Hindu Business Line : ICICI Bank raises lending rates

This is the second time the bank has increased the home loan rates in the current fiscal. With this hike, the floating rate on home loans is 9.5 (9 per cent) and fixed rate is 10.75 (10.25 per cent).

The bank said the hike was necessary to meet the increase in cost of funds and would not lead to a slowdown in advances. Earlier it raised home loan rates in May by 50 basis points. In 2005-06, the bankmarked up home loan rates in February 2006 and June 2005, each time by 50 basis points.

ICICI Bank's move comes close on the heels of the 25 basis points increase in the repo and reverse repo rates by Reserve Bank of India. Most bankers feel that while the hike by RBI may not immediately lead to an increase in loan rates, in the long run, there is a tendency towards hardening of interest rates.

Home loans comprise about 50 per cent of ICICI Bank's retail portfolio.

Ms Chanda Kochhar, Executive Director, ICICI Bank, said, "The rationale behind this hike is that there has been an increase in cost of funds over the last six months. Between January and March, costs of funds went up but we had not passed it fully to our customers.

"Usually during April and May we do see a softening of interest rates post the closure of the financial year. But this time around that did not happen.'' There was a clear indication that interest rates were headed upwards, she said but was confident that customers would be able to absorb the higher rate.

SBI to decide next week

State Bank of India may take a decision on interest rates next week. "Our home loans have effectively increased by 100 basis points. We raised the home loans by 50 basis points in May and also increased our PLR by 50 basis points. So, we may not raise rates immediately," an SBI official said.

Mr G.V. Nageswara Rao, Managing Director and CEO, IDBI Bank, said, the bank would take a view after watching the market behaviour. "Normally deposit rates would also go up along with lending rates. But it is difficult to say if retail or corporate loans will increase first," he said.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Monsoon weakens — Dry phase likely to continue for 8-10 days

Corporates log on to Net banking

Cheaper food, textile items control inflation

Maharashtra eases fuel rate hike

What the world pays for petrol

Panel to study textile ind contract employment offer

L&T Infotech aims to be $1-b co

Pink slip fears come back to haunt techies

Cotton-growing States unite against Monsanto

Pricing of Bt cotton should be market-driven, says Monsanto

Markets recover sharply

Diversified equity funds have rough ride

ICICI Bank raises lending rates

BSE poised to launch trading in corporate bonds