HDFC, ICICI drop cheap home loans
In a clear signal of a rising interest rate regime, country’s largest private sector lender, ICICI Bank, today said it has hiked its
auto loan rates by up to 0.5 per cent and withdrawn its 8.25 per cent special home-loan scheme.
“Auto loans rack rates have been raised by 0.25-0.5 per cent depending on segment and tenor with effect from March 5,” 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 in its last monetary policy review.
With a view to suck out excess liquidity from the system, the RBI hiked the cash reserve ratio or the amount banks have to keep with RBI for zero interest by 0.75 per cent to 5.75 per cent, absorbing Rs 36,00-crore from the system.
Following the hike, interest rates for new auto loans will now be in the range of 9.75-11 per cent.
ICICI Bank also withdrew its special home-loan scheme, under which it offered home-loans for 8.25 per cent fixed rate for two years, effective from March 1, the spokesperson added.
On home-loans, ICICI bank is currently offering home-loans for up to Rs 30-lakh at 8.75 per cent, loans between Rs 30-lakh to Rs 50-lakh at 9 per cent and those above Rs 50-lakh, at 9.50 per cent.
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 today.
While Kotak Mahindra Bank has hiked its home-loan rates by 0.25-0.5 per cent with effect from February 18, Kotak Mahindra Prime, which is the dedicated car financing arm of group, has hiked its loan rates by 0.5-0.75 per cent.
“We decided to hike the interest rates for home-loans by 0.25-0.5 per cent. 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 per cent in the current year, he said.
Kotak Mahindra Prime’s Chief Executive Officer, Sumit Bali, said the hike in lending rates will come in to effect from March 8.
“We are hiking the lending rates as the cost of funds have gone up by up to 0.75 per cent. We have to pass on this additional cost to customers, which we didn’t do last month” Bali said.
KMP has a a total loan-book of around Rs 6,500-crore, which grew by around 35 per cent in the current financial year. Moving ahead, the company expects a loan growth in the range of 15-20 per cent, Bali said.
HDFC, ICICI drop cheap home loans
In a move that marks the end of teaser rates on home loans and the beginning of hard- ening of home loan rates, hous- ing finance companies (HFCs), HDFC and ICICI Bank on Friday rolled back their two- year fixed home loan offering at 8.25 per cent, effective March 1.
The two command a 55 per cent marketshare of the home loans market with leader HDFC controlling a 35 per cent share and ICICI Bank 20 per cent (SBI has a 22 per cent share), accord- ing to industry sources.
But the hardening is not on home loans alone. On the auto loans front, ICICI Bank and Kotak Mahindra Bank raised rates by 50 basis points (100 basis points make 1 percentage point) and 50-75 basis points, respectively.
HDFC Bank has hinted at following suit.
While Kotak’s auto loans hike will be effective March 6, it had raised its home loan rate by 50 basis points on February 18. With rollbacks in place, the entry rate for home loans from ICICI Bank and HDFC stands at 8.75 per cent for loans up to Rs 30 lakh and Kotak offers 8.5 per cent.
“Clearly, there is an upward bias but it will depend on how the market moves on deposit front,” said K.V.S. Manian, group head (liabilities and branch banking), Kotak.
LIC Housing Finance is also looking at its cost of funds.
“There is an upward bias but as of now we are continuing with the current rates,” the compa- ny’s CEO R.R. Nair said. “If we see an upward movement in rates, we will revise our rates.”
Not all agree. “Rates may go up but not in the short-term as there is ample liquidity of about Rs 350,000 crore in the system,” said Keki Mistry, vice chairman and managing direc- tor, HDFC.
Barely a month of Reserve Bank of India raising concerns on teaser rates, the two lead- ing private sector HFCs have withdrawn their offerings.
“ICICI Bank has discontin- ued the 2-year fixed rate home loan scheme with effect from March 1, 2010,” an ICICI Bank statement said.
While ICICI Bank raised the auto loan rate by 25-50 basis points from Friday, HDFC Bank may follow. “There is a possibility of a revision in auto loan rates by 50 basis points,” an HDFC Bank official on con- ditions of anonymity said.
Public sector banks, howev- er, are likely to stick to their special schemes till the end of this month. “We are still offer- ing the special rates and will continue till March 31,” a Punjab National Bank official on con- ditions of anonymity said.
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