ICICI hikes consumer loan rates as RBI tightens credit flow
31 Mar 2007
Mumbai: ICICI Bank, India's largest private sector bank, has hiked its floating reference rate by one per cent for consumer loans, including home loans, effective March 31. It also announced an increase of one per cent in its benchmark advance rate.
The revised FRR will be 12.75 per cent per annum, as against 11.75 per cent at present, and the revised I-BAR will be 15.75 per cent per annum payable monthly, as against 14.75 per cent at present.
For existing floating rate customers, the increase in FRR by one per cent will be effective from April 1, 2007. Existing fixed rate customers, whose loans are fully disbursed, will, however, not be impacted by the increase and their contracted rates will remain unchanged, the bank stated.
Car and home loans are set to cost even more with the Reserve Bank of India raising banks' reserve ratio, or CRR by 50 basis points, and the repo rate (the rate at which banks borrow from the central bank) to 7.75 per cent
The impact of the RBI hike would be directly felt on the equated monthly installments (EMI) that are paid by the borrowers.
The State Bank of India (SBI), the largest public sector bank, also expects the current rate hike to impact credit growth.
The hike, however, has come as a welcome relief for people who rely on interest on savings. And, with fixed deposit rates ruling at around 10 per cent, banks will now have to slow down on lending. Interest rates on fixed deposits and savings accounts are likely to go up further. Home loan rates are expected to shoot up by around 0.5 per cent.
ICICI Bank is the largest player in the home loan market. HDFC, the other big lender, is likely to follow suit.
