The Hindu Business Line : ICICI Bank hikes home loan rates

Mumbai March 31 Consumer loans including home from ICICI Bank, the country's largest private bank, will cost more by one percentage point, a day after the RBI hiked key short-term rates.

The central bank on Friday hiked the repo rate by a quarter percentage point to 7.75 per cent and increased the cash reserve ratio by 50 basis points to 6.50 per cent. ICICI Bank has increased its floating reference rate (FRR) by one percentage point to 12.75 per cent for consumer loans (including home loans), effective March 31. "For existing floating rate customers, the increase in FRR by 1 per cent will be effective April 1," said a press release.

The bank has also hiked its benchmark advance rate (I-BAR) by one percentage point to 15.75 per cent per annum, payable monthly.

"We have hiked the lending rates as we expect the cost of funds to move up with the increase in CRR," said Ms Vishakha Mulye, Group CFO, ICICI Bank. A one percentage point increase on home loan rates, will mark up equal monthly instalments by about Rs 65 per month for every Rs 1 lakh loan. This is the fourth time ICICI Bank has raised its benchmark rate, with two hikes coming in December and February after the RBI hiked CRR. In February, the ICICI Bank had raised its benchmark rate by one percentage point to 14.75 per cent.

Existing fixed rate customers whose loans are fully disbursed, will, however, not be impacted by the revision and their contracted rates will remain unchanged, clarified the bank's press release.

Credit growth

When asked about credit growth in the new fiscal, 2007-08, Ms Mulye said, "We will wait and watch because apart from interest rates there are other factors impacting loan growth. For instance, if a corporate has already decided on a project it will go ahead with the loan."

YES Bank was the first to hike its prime lending rate by 75 basis points to 14.75 per cent. State Bank of India, UTI Bank and HDFC Bank have not yet taken a view on interest rates, said senior officials from the banks.

The gap between the prime lending rates of public and private sector banks has now widened further. SBI's prime lending rate is 12.25 per cent, while that of HDFC Bank and UTI Bank is 14 per cent each.

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