ICICI Bank cuts home loan rates by 10 bps

ICICI Bank, the country’s largest private sector lender, has reduced home loan rates by up to 10 basis points (bps) for loans up to Rs 75 lakh. Under the new scheme, which will be offered till June 30 for new customers, interest on home loans up to Rs 75 lakh will be charged at 10.15 per cent or 15 bps over the base rate.

For loans above Rs 75 lakh, the bank will continue to charge between 10. 5 per cent and 11.25 per cent.

This new rate is applicable only for salaried individuals. For self-employed consumers home loan rate remains the same at 10.25 per cent.

With this new rate, ICICI Bank’s home loan rate up to Rs 75 lakh is on a par with that of State Bank of India (SBI). SBI, the country’s largest lender, however, charges 10.30 per cent for loans above Rs 75 lakh.

Foe women borrowers, the interest on home loans up to Rs 75 lakh is 10.10 per cent. The revised rates are only applicable for new customers of ICICI Bank.

Lenders have been aggressive in pricing their retail loans over the past couple of years amid sluggish corporate credit growth on the back of a slowing economy. This was also evident from ICICI Bank’s business growth numbers for 2013-14 as retail lending outperformed the bank’s overall credit growth.

“The bank continued to adopt a calibrated approach to growth given the developments in the environment. Accordingly, our domestic loan portfolio grew by 14.8 per cent on a year-on-year basis as of March 31, 2014, driven primarily by the retail business,” N S Kannan, chief financial officer of the bank, said during the post earnings call with analysts. During the previous financial year, non-food credit growth was 14.2 per cent.

Growth in the retail portfolio of ICICI Bank improved to 23 per cent year-on-year as of March 31, 2014, compared to 11.4 per cent as of March 31, 2013. The bank’s commercial loan business declined by 17 per cent in the previous financial year due to sluggish demand.

“This has been driven by growth in secured products with the outstanding mortgage and auto loan portfolios actually growing by 23 per cent and 38 per cent respectively on a year-on-year basis as of March 31, 2014,” Kannan had said.

For the current financial year, the bank expects to grow its loans two-four per cent higher than the system as some recovery in economic growth is expected along with a stable interest rate regime. The Reserve Bank of India (RBI) has raised the key policy rate or the repo rate by 75 bps on three occasions since September, 2013, though it decided to keep the rate unchanged during the last policy review in April. The central bank will meet once again on June 3 to review its policy in which it is widely expected to hold the interest rate once again.

ICICI Bank expects loan growth will continue to be driven by retail credit which is likely to grow by more than 20 per cent.