ICICI
Bank Raises Interest Rates on Loans, Deposits
India's biggest bank
by market value, raised its benchmark lending
rate by one percentage point to 14.75 percent,
the second increase since December.
February 6, 2007: The bank,
which has one-third share of lending to individuals
for purchase of houses, cars and other durables,
said the floating rate on home loans has been
raised by one percentage point to 11.75 percent.
ICICI Bank will pay 125 basis points more
on its fixed deposits on maturity of five
years on an amount of 100,000 rupees ($2,267)
or less. One basis point is one-hundredth
of a percentage point. The revised rate will
be 9.5 percent compared with 8.25 percent,
it said. The new rates will be effective Feb.
9, the bank said in a statement faxed from
Mumbai.
ICICI Bank raised its lending rate after the
Reserve Bank of India, the country's central
bank, on Jan. 31 raised the key interest rate
at which it lends overnight by a quarter point
to a four-year high of 7.5 percent, making
it more expensive for banks borrowing from
it.
The central bank has raised rates five times
over the past year to reduce the availability
of money and contain the inflation rate that
accelerated to a two-year high of 6.12 percent
in the week ended Jan. 6.
ICICI Bank last raised its lending rate by
half a percentage point effective Dec. 18.
It raised the home loan rate to 10.75 percent
from 10.25 percent and its benchmark lending
rate to 13.75 from 13.25 percent.
Expanding Loans
About 68 percent of ICICI Bank's loans are
to individuals to purchase houses, cars or
other durables. The bank's loans rose 42 percent
in the three months ended Dec. 31 to an outstanding
1.8 trillion rupees.
Bank loans have been rising rapidly as the
economy expands. Loans rose about 30 percent
through the year to Jan. 19, outpacing the
23 percent growth in deposits, according to
central bank data. Loans expanded at an average
35 percent in each of the past two financial
years.
ICICI Bank and HDFC Bank Ltd, India's two
biggest non- state-owned banks, give 68 percent
and 55 percent of their loans, respectively,
to individuals.
India's Finance Minister P. Chidambaram yesterday
told chairmen of state-run banks to hold home
loan rates at current levels.
``Ninety percent home loans are to middle
or lower middle class people,'' O.P. Bhatt,
chairman of the State Bank of India, India's
largest lender with more than 9,000 branches
catering to 100 million customers, said in
New Delhi yesterday.
Raising either the monthly installment of
payments or extending the maturity of the
loan would hurt borrowers, Bhatt said.
Source: Bloomberg
