Car/home loan rates set to rise

DIFFERENT STROKES

Top private banks in the country are considering raising the interest rates on all consumer loans in an attempt to protect margins.

HDFC Bank has already jacked up the rates on car loans by 25 basis points to 9.25 per cent. A senior HDFC Bank official said, "Our asset liability committee will meet shortly to decide on a hike in other retail lending rates."

ICICI Bank managing director and CEO K V Kamath also said today that his bank would "consider revising all consumer lending rates based on the maturity and character of loans".

Meanwhile, UTI Bank and IDBI Bank are also contemplating hikes in their home loan rates, taking a cue from the HDFC and ICICI Bank. IDBI Bank will revise its home loan rates "" both fixed and floating "" by 25 to 50 basis points shortly, said a senior official. "We will realign our rates with the competition," he said.

UTI Bank is also exploring a hike in home loan rates, but has ruled out any rise in other retail lending rates.

Justifying the home loan rate hike on the sidelines of the annual conference on risk management organised by the Institute of Internal Auditors here today, Kamath said: "We have increased the home loan interest rates to protect our margins. This is a lag correction as the deposit rates have gone up by 50 basis points in the last few months."

The yield on 10-year government security has risen from 5.29 per cent in mid-June to 6.94 per cent. This means, to get funds for on-lending, banks themselves will have to cough up a similar or higher interest rate.