ICICI, HDFC push up borrowing rates again

ICICI Bank and HDFC Bank - the country's largest and second largest private lender respectively - on Wednesday increased their benchmark lending rates, making loans more expensive for corporate and retail borrowers.

ICICI Bank increased its base rate by 50 basis points (0.5 per cent) with effect from today. The revised rate will be 8.75 per cent as against 8.25 per cent at present. The bank also increased return on its deposits by 25 to 50 basis points.

HDFC Bank has revised its base rate by 45 basis points to 8.2 per cent. It has, however, retained deposit rates at current levels.

This is the third increase in lending rates since July, when the Reserve Bank of India introduced the concept of base rate - a new benchmark that was related to the cost of funds for banks.

According to lenders, going by the increase in deposit rates, the rates could inch up further. The increase in rates would impact most new and old borrowers. However, existing auto loan borrowers are unlikely to be impacted since these loans are generally advanced at a fixed rate.

The latest increase in lending rates by ICICI Bank will make its home loans most expensive – more than two of its biggest rivals, State Bank of India and HDFC. ICICI Home loans will now cost 9.75 per cent for borrowings up to Rs30 lakh and 10.25 per cent for larger borrowings.