Tuesday, February 06, 2007

ICICI Bank Raises Interest Rates on Loans, Deposits

Bloomberg reports

By Sumit Sharma

Feb. 6 (Bloomberg) -- ICICI Bank Ltd., India's biggest by market value, raised its benchmark lending rate by one percentage point to 14.75 percent, the second increase since December.

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.

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