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N.S. Vageesh

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Chennai Feb. 6 ICICI Bank can afford to do it; has been compelled to do it; and has done it! It has hiked its home loan rates by one percentage point.

For, private banks do not have their hands tied by political masters. If their costs go up, they don't hesitate to pass them on.

Although the immediate trigger may have been the recent hike in the Reserve Bank's repo rates, deposit rates across the banking system have gone up by about 1.5 percentage points during the last quarter. Since, ICICI Bank operates on a thin net interest margin of about 2.5 per cent, a hike in lending rates was inevitable.

The bank focuses on volumes to drive growth. Roughly, every third housing loan in the country is given by ICICI Bank. With that kind of muscle in market share, the bank has pricing power and can afford to hike rates ahead of competition.

The other public sector banks may have to follow suit, if not immediately, a couple of weeks later. Even the Finance Minister will see the writing on the wall.

More Stories on : Housing Finance | Interest Rates | ICICI Bank Ltd | Private Banks

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