ICICI Bank has reduced interest rates on home loans by 10 basis points to 10.15% for customers who borrow up to R75 lakh. The new rates, which come into effect from May 15, would apply for loans approved by June 30, 2014.
Also, the discounted rate would be applicable only to salaried customers; self-employed customers must pay 10.25%, bank sources told FE.
For loans above R75 lakh, the bank will continue to charge an annual interest rate of 10.5-11.25%. In December last year, the country’s largest private sector lender had cut interest rates on home loans by up to 15 bps for loans up to R75 lakh.
The new rate puts ICICI Bank at par with the country’s largest lender State Bank of India, which offers customers loans up to R75 lakh at 10.15%. SBI has a dominant 26.05% market share in the home loan space, followed by HDFC at a close second.
ICICI Bank will give home loans up to R15 lakh, classified under priority sector lending, at 10.15%, too. This offer is applicable only to those customers who, including their dependent family members, either do not own any home currently or are transferring the loan from other banks for the only home that they own.
According to the RBI data, the size of the home loan market as on March 21, 2014, was R5,40,800 crore, up 18.4% over the same period last year and constituted 52% of the total outstanding under the personal loan category.
ICICI Bank is the first among the lenders to cut home loans rates after the Reserve Bank of India left rates unchanged at its last monetary policy review in April.
On an analyst call last month, NS Kannan, executive director, ICICI Bank, had said the bank?s domestic loan portfolio grew 14.8% year-on-year in Q4FY14, driven primarily by the retail segment, which grew 23 % y-o-y.
According to Ananda Bhaumick, senior director, India Ratings, the reduction in rate could be a consequence of the bank being able to lower its cost of deposits with an improvement in Casa ratio. However, he said it is too early to say if others would follow as SBI and HDFC are generally considered benchmarks when it comes to lending rates.
With demand for corporate loans yet to pick up, banks are looking for more business from the retail space. ?There hasn’t been much loan growth in the corporate sector and that is why, from the beginning of the year, we decided to shift the focus slightly towards the retail and SME segments,? Bank of Baroda CMD SS Mundra had told FE last month.
