EMIs set to rise as ICICI Bank, HDFC hike rates

23 Aug 2013, ENS Economic Bureau

Borrowers will have to shell out more money as EMI (equated monthly instalment) on their home and auto loans with two leading lenders, ICICI Bank and HDFC, jacking up interest rates.

ICICI Bank, India’s second largest lender, has announced an increase of 0.25 per cent in its base rate with effect from August 23. The revised rate will be 10 per cent as against 9.75 per cent at present. Home loan major HDFC has increased its Retail Prime Lending Rate (RPLR), on which its Adjustable Rate Home Loans (ARHL) is benchmarked, by 0.25 per cent with effect from August 23.

“In February this year HDFC had reduced its RPLR by 10 bps and hence on a net basis the RPLR is higher only by 15 bps since January 2013,” HDFC said.

ICICI Bank has also announced an increase of 0.25 per cent in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from August 23. This benchmark rate is used for determining interest rates on loans and advances sanctioned up to June 30, 2010. With effect from July 1, 2010, interest rates on new loans and advances, including consumer loans, are determined with reference to I-Base.

ICICI Bank has also announced an increase of 0.25 per cent in its benchmark prime-lending rate and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from August 23, 2013.

The above benchmark rates are used for determining interest rates on loans and advances sanctioned up to June 30, 2010.

The fixed rate customers will not be impacted by the above revision and their contracted rates will remain unchanged.

The RBI’s cash-tightening measures had pushed short-term money market rates along with government bond yields to higher levels, creating fear of increase in cost of funds for financial institutions. But RBI had indicated that these measures were short-term in nature and would be rolled back as and when the rupee is stabilised.

As of now, the rate hike is restricted to private banks as their cost of funds has increased while none of the leading PSU banks have announced a hike in rates so far. Banks with heavy reliance on the wholesale funding are the ones raising the lending rates as the rates in the money markets hardened following the RBI moves.

“Our cost of funds is in tact. SBI is also flush with deposits,” SBI chairman Pratip Chaudhuri said while ruling out a hike in rates last week.

On Monday, Axis Bank hiked its base rate, the minimum lending rate, by 25 basis points, to 10.25 per cent, pushing up the cost of home and auto loans. This means all categories of loans will become costlier at least by 0.25 per cent. Earlier this month, HDFC Bank, the country’s second largest private lender, had raised the base rate to 9.80 per cent from 9.60 per cent.

Increased cost of funds

* ICICI Bank has announced an increase of 0.25% in its base rate with effect from August 23

* The revised rate will be 10% as against 9.75% at present

* HDFC has increased its Retail Prime Lending Rate (RPLR), on which its Adjustable Rate Home Loans (ARHL) is benchmarked, by 0.25% with effect from August 23

* The RBI’s cash-tightening measures had pushed short-term money market rates along with government bond yields to higher levels

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Posts

Recent Comments

Archives

Categories

Meta

GiottoPress by Enrique Chavez