ICICI Bank to jack up PLR afresh

Deposit rates up 50 bps, auto loans rise 100 bps.

The country's second largest bank, ICICI Bank is considering a third increase in its benchmark prime lending rate (PLR) since raising it for the first time less than 60 days ago, even as it announced hikes in its deposit rates and automobile loan rates.

"We are likely to announce a 50 basis points hike in our PLR (the benchmark rate applicable for corporate loans) in a day or two," an ICICI Bank source said.

ICICI Bank has raised its deposit rates across the board by up to 50 basis points, effective tomorrow. The increase in deposit rates in less than a month is 100 basis points, as the bank had raised deposit rates by 50 basis points in early February 2005. One basis point is one hundredth of one percentage point.

The bank, which raised its home loan PLR by 50 basis points to 9.25 per cent recently, has also stopped offering all kinds of interest rate discounts on housing loans. It had already increased interest rates on loans provided for purchase of automobiles by 100 basis points.

ICICI Bank had raised its PLR, which it calls ICICI Bank benchmark advance rate (I-BAR), by 50 basis points to 11.75 per cent in early February after a 25 basis points increase in early January.

ICICI Bank's average cost of deposits at the end of December was around 4.7 per cent and its yield on advances at about 8.20 per cent. Its net interest margin was nearly 2.2 per cent.

"We continuously watch the impact of our cost of funds on the lending rates. The lending rates are now on watch," said Chanda Kochhar, ICICI Bank's executive director.

She said interest rates on deposits have been increased because of the pressure up in the banking industry.

"The market for deposits has become interest-rate sensitive. Customers expect higher interest rates at the time of renewals," Kochhar pointed out.