The Hindu Business Line : Banks, housing finance cos hike lending rates

HDFC has raised interest rates on its home loans across all segments by 0.5 percentage points with effect from February 1. IDBI Ltd has raised retail lending rates by 0.25 percentage points, while SBI will decide on the rate hike in a week. LIC Housing Finance too is expected to take a decision shortly.

The Reserve Bank of India had increased reverse repo and repo rates by 0.25 percentage points in its mid-term review of the monetary policy last month, signalling a hardening of interest rates.

Banks' cost of funds has gone up with their increasing reliance on resources other than deposits.

In fact, there has been a slowdown in deposit growth.

Though many banks have hiked deposit rates to attract more funds since November, most of them have not increased their lending rates, which has put pressure on their margins.

Now a hike in lending rates seems inevitable, according to bank officials.

Mr G.V. Nageswara Rao, Managing Director and CEO, Commercial Banking, IDBI, said that retail lending rates have increased depending on the product and maturity.

Home loans constitute about 40 per cent of the bank's retail assets.

On the deposit side, rates have gone up on large deposits of Rs 1 crore and above and the bank is reviewing rates on small deposits, Mr Rao said.

ICICI Bank had last raised home loan rates in June 2005, along with HDFC, but it has no plans to hike the rates immediately, said Mr Rajiv Sabharwal, General Manager, ICICI Bank.

"We are monitoring our cost of borrowing and as of now we don't feel the need to raise rates. If we do find an uptrend in costs, we may increase rates."

ICICI Bank charges an average of 7.75-8 per cent on floating loans and nine per cent on fixed loans.

Mr S.K. Mitter, Director and CEO, LIC Housing Finance, said: "We are considering the situation and are likely to take a decision in 2-3 weeks. The pressure on margins is high. But as 90 per cent of our portfolio is in the floating interest rate, we have the option of raising the interest rate anytime."

The housing finance company charges 7.75 per cent on floating rates and 8.25-9 per cent on fixed rates.

In the 2005 calendar year LIC Housing Finance raised the interest rate thrice on existing portfolios, Mr Mitter said.

SBI is likely to take a decision on the matter in a week, according to Ms Soundara Kumar, General Manager, Personal Banking.

"We are examining our portfolio but have not yet taken a decision."

The average rate is around 8.25 per cent, but during festival season the bank does offer home loans at 7.25 per cent. Only 7-8 per cent of the loans are in fixed rate loans, she said.

More Stories on : Interest Rates | Housing Finance

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

Stories in this Section
Extended range weather forecast on anvil

An apartment for Rs 1.5 cr — Coimbatore matches metros

Failure to meet roll-out obligation — Telecom cos face Rs 406-cr fine

Airport employees strike work; flight operations normal: Govt
Traffic disruption mostly felt in Kolkata

Cabinet clears bids

PM for moderate tax regime

Sensex misses 10,000-mark; drops sharply

Media waits another day for Sensex to touch 10 K

It's a mixed show by PSBs in Q3

Banks, housing finance cos hike lending rates

STCI acquires UTI Securities for Rs 265 cr

MS unveils rural thrust; to roll out 50,000 kiosks