Mumbai, Feb. 6: A day after home-loan borrowers heaved a sigh of relief when state-run banks agreed to insulate them, ICICI Bank winched up its interest rate by one percentage point.
The country’s largest private bank said its floating reference rate (FRR) — the benchmark rate for all consumer loans, including home loans — has been revised to 11.75 per cent from 10.75 per cent.
The bank had raised this rate by half-a-percentage-point (or 50 basis points) in December.
The rate tweak means floating rate loans of ICICI Bank will now carry interest between 10.50 and 10.75 per cent, instead of the present band of 9.50 to 9.75 per cent.
Fixed rate loans of a 20-year maturity will move up to 12.50 per cent from 11.50 per cent. The new rates will be effective from February 9.
If an ICICI borrower has opted for a floating rate loan of 20-year maturity at an interest rate of 9.50 per cent, his equated monthly instalment (EMI) per lakh of rupees will now go up to Rs 999 from Rs 933.
The EMI will stand at Rs 1,016 per month, instead of Rs 949, for a loan of Rs 1 lakh at 9.75 per cent.
In the case of fixed rate loans of the same maturity, new customers will be paying Rs 1,137 per lakh for a loan at 12.50 per cent as against Rs 1,067 at the earlier rate of 11.50 per cent.
HDFC, another big player in home loans, is not reviewing the rates as of now, Renu Sud Karnad, executive director, said.
ICICI Bank sources said the rate hike was prompted by the rising cost of funds and tight liquidity, partly caused by the RBI’s rate change announced last week.
But the RBI had kept home loans out of increased provisioning requirements — the cash kept aside by banks on each loan to meet possible defaults. The finance minister had yesterday asked state-run banks to spare home loans, which they agreed to do.
ICICI Bank’s depositors stand to gain. The bank has increased interest rates on fixed deposits of less than Rs 1 lakh by 1.25 percentage points to 9.50 per cent for a five-year tenure.