ICICI Bank, Kotak Mahindra hike home and auto loan rates by up to 0.5%

ICICI bank country’s largest private sector bank has withdrawn its 8.25% special home-loan scheme and hiked its auto-loan rates by up to 0.5%, signifying rising interest rate regime.

An ICICI Bank spokesperson told, "Auto loans rack rates have been raised by 0.25%-0.5% depending on (the) segment and tenor with effect from 5th March."

The bank sources have not given any reason for hiking rates but industry experts believe that the bank decision is largely prompted by indications given by the RBI in its last monetary policy review.

In its policy review RBI had hiked the cash reserve ration or the amount banks have to park with the central bank by 0.75% to 5.75%, absorbing Rs36,000 crore from the system in order to absorb excess liquidity from the system. The hike in CRR will be able to absorb Rs 36000 crore from the system.

ICICI Bank special home-loan scheme stands withdrawn from 1st March said the spokesperson. The bank has raised new auto loans which will be in the range of 9.75%-11%.

At present bank is offering home loans up to Rs30 lakh at 8.75%; loans between Rs30-lakh to Rs50 lakh at 9% and those above Rs50 lakh at 9.5%.

Another private sector bank, Kotak Mahindra Bank and its car financing group has also raised its home and car-loan rates.

Bank has hiked its home-loan rates by 0.25%-0.5% with effect from 18th February, Kotak Mahindra Prime (KMP), the car-financing arm of the group, has hiked its loan rates by 0.5%-0.75%.

Kamalesh Rao, Kotak Mahindra Bank's head of retail assets said, "We decided to hike the interest rates for home loans by 0.25%-0.5%. This is primarily to align lending rates in line with the cost of deposits."

He told this year bank registered a growth by 50% in its home-loan segment. KMP chief executive Sumit Bali told that the new lending rates will be effective from 8th March.

Mr Bali said, "We are hiking the lending rates as the cost of funds has gone up by up to 0.75%. We have to pass on this additional cost to customers, which we didn't do last month".

In this financial year KMP total loan book of around Rs 6,500 crore has registered a growth of around 35%. Mr Bali said, the company is looking at loan growth in the range of 15%-20%.