ICICI Bank raises prime lending rate by 50 basis points

14 February 2006

ICICI is the first bank to announce a hike in PLR after the RBI raised short term rates by 25 basis points last month.

ICICI Bank said it is raising its PLR (also called ICICI Bank Benchmark Advance Rate or IBAR) to align lending rates with deposit rates. The banking sector has been facing upward pressure on interest rate paid on deposits for the last year or so. Deposit growth has also been slow as other asset classes like equities and real estate have been giving much better rates of return to retail investors.

Credit growth for the banking sector has kept a fast pace as the economy has clocked growth rates in excess of 7.5 per cent for the last two years and looks all set to repeat the same this year as well. Growth rates in the retail lending segment for major players like ICICI Bank has been in the region of around 50 per cent annually.

ICICI Bank had announced a hike in its home loan rates by 50 basis points recently. Though the bank is yet to announce a rate hike for personal and auto loans, rates are expected to harden in these segments as well.

ICICI Bank had come out with a follow-on public issue during the quarter ended December 2005 to shore up its capital base and meet the growing credit demand. The bank raised a total of around Rs8,000 crore from the domestic as well as international offerings.

ICICI Bank closed at Rs609.5 (up 0.94 per cent) on the NSE yesterday.