Private banks hike rates on auto, home loans

ICICI Bank raised auto loan rates by 25-50 basis points (bps) for different tenors and segments, effective from March 5. ICICI Bank also discontinued its special home loan rate of 8.25% for two years. The bank will now charge 8.75% for loans up to Rs3mn, 9% for loans of Rs3mn to Rs5mn and 9.5% for loans over Rs5mn. HDFC Bank and Kotak Mahindra also raised rates on home and auto loans.

HDFC's home loan rates have reverted to 8.75% for loans up to Rs3mn, 9% for loans between Rs3mn and Rs5mn and 9.25% for loans over Rs5mn. Till last month, it was offering loans at a fixed rate of 8.25% up to March 31, 2012, after which the loan would revert to the prevailing floating rate.

Last month, Kotak Mahindra discontinued the fixed rate home loan scheme which was introduced in December. The bank last month also increased rates on its floating rate home loans by 50 bps. It is now in the range of 8.50-9%. The rates on personal loans also went up by 50 bps to around 18.5%.

These private banks raised lending rates by as much as 100 basis points, following the hardening of market rates even as the RBI has refrained from tinkering with the policy rates till now. In its last policy meeting in January, the central bank raised the cash reserve ratio (CRR) by 75 basis points. Banks are raising lending rates to maintain their profitability after they increased deposit rates in the last few months to attract funds.