ICICI Home Finance Co (I-HFC), the home-loan arm and subsidiary of ICICI Bank, has increased the interest rate on its new home loans by 1 percentage point.
The bank’s floating rate loan has been raised from 12 per cent to 13 per cent, while its fixed rate loan stands at 16.5 per cent.
These rates are the highest in the industry, but will not be applicable to existing customers.
The country’s largest home loans provider increased rates on October 10, without making any formal announcement. The rate hike was discovered by some customers who went to I-HFC to take a home loan.
“We were not sent any mail as the bank has not increased the benchmark prime lending rate but has increased the margin,” said a direct sales associate (DSA) of ICICI Bank. “We were informed over the phone, 10 days ago.”
Said a ICICI Bank spokesperson: “As we are seeing an increase in our cost of funds, the same is being reflected in our lending rates.”
This hike comes at time when Reserve Bank of India (RBI) has been consistently lowering its policy rates, beginning October 6.
The Central bank reduced the percentage of money commercial banks have to keep with it as cash by 250 basis point (100 basis points make 1 percentage point). It later followed it with a 100 basis point cut in the rate at which RBI lends to commercial banks.
While the former increases liquidity in the system starved for funds, the latter lowers the cost of funds.