ICICI Bank withdraws 8.25% special home loan scheme; hikes auto loan rates by up to 0.5%
Though the bank did not give any reason for the rate hike, industry experts said that the rate increase was largely prompted by signals communicated by the RBI in its latest monetary policy review
In a clear signal heralding a rising interest rate regime, the country's largest private sector lender, ICICI Bank Ltd, on Thursday has withdrawn its 8.25% special home-loan scheme and hiked its auto-loan rates by up to 0.5%, reports PTI.
"Auto loans rack rates have been raised by 0.25%-0.5% depending on (the) segment and tenor with effect from 5th March," an ICICI Bank spokesperson said.
Though the bank did not give any reason for the rate hike, industry experts said that the rate increase was largely prompted by signals communicated by the Reserve Bank of India (RBI) in its last monetary policy review.
With a view to mop up excess liquidity from the system, the RBI had hiked the cash reserve ratio or the amount banks have to park with the central bank by 0.75% to 5.75%, absorbing Rs36,000 crore from the system.
ICICI Bank also withdrew its special home-loan scheme, under which it offered home loans for 8.25% fixed rate for two years, effective from 1st March, the spokesperson added. Following the hike, ICICI Bank's interest rates for new auto loans will be in the range of 9.75%-11%.
The bank is currently offering home loans for up to Rs30 lakh at 8.75%; loans between Rs30-lakh to Rs50 lakh at 9% and those above Rs50 lakh at 9.5%.
Another private sector lender, Kotak Mahindra Bank and the group's car-loan financing arm also announced hikes in their home and car-loan rates respectively.
While Kotak Mahindra Bank has hiked its home-loan rates by 0.25%-0.5% with effect from 18th February, Kotak Mahindra Prime (KMP), which is the dedicated car-financing arm of the group, has hiked its loan rates by 0.5%-0.75%.
"We decided to hike the interest rates for home loans by 0.25%-0.5%. This is primarily to align lending rates in line with the cost of deposits," Kotak Mahindra Bank's head of retail assets, Kamalesh Rao, said.
The bank's home-loan portfolio grew by 50% in the current year, he said. KMP chief executive Sumit Bali said that the hike in lending rates will come into effect from 8th March.
"We are hiking the lending rates as the cost of funds has gone up by up to 0.75%. We have to pass on this additional cost to customers, which we didn't do last month" Mr Bali said.
KMP has a total loan-book of around Rs6,500 crore, which grew by around 35% in the current financial year. Moving ahead, the company expects a loan growth in the range of 15%-20%, Mr Bali added.