Jan. 24: Retail and home loans are about to become more expensive.
Banks are readying to raise interest rates after the RBI today raised two key rates by quarter of a percentage point.
This is the fourth time that the repo and the reverse repo ' rates that regulate the inflow and outflow of cash into the system ' have been raised in the past 15 months. Almost on all occasions, it has been followed by a small rise in home and retail loan rates.
Calcutta-based Allahabad Bank was among the first to announce that it would raise home loan rates by at least 0.25 percentage points. It said it would review other lending rates as well.
HDFC, the country’s largest housing finance company, has already declared that it is reviewing its home loan rates.
State Bank of India chairman A.K. Purwar has hinted at a hike in retail lending rates in view of the tight liquidity in the market. Others like Dena Bank are also mulling a rate rise. However, a few other banks, like ICICI Bank, are sitting on the fence.
HDFC officials said they would take a fresh look at interest rates within the next six to seven days. There is a strong possibility that it will raise rates by 0.25 to 0.50 percentage points.
ICICI Bank is holding its cards close to its chest. Bank officials said they would closely study their cost of funds and other related factors before taking a decision.