ICICI Bank, once a price warrior in the retail loan market, may be getting back in the game. The country’s second-largest bank has lowered interest rates on loan by 50 basis points, making it the second rate cut in six weeks. The move will reduce rates on home and auto loans for new and existing borrowers of ICICI.
Other big lenders are also pruning rates in the absence of a quick loan offtake. On May 7, India’s largest home finance company HDFC lowered its prime lending rate (PLR) — the benchmark rate to which all floating rate loans are linked — by 25 basis points. In a less-publicised move, HDFC also made an additional 50 basis points reduction in interest rates for new borrowers availing loans in the range of Rs 30 lakh to Rs 1 crore. This was done by revising the spread between PLR and the loan rate.
A 25-basis points cut reduces the loan EMI by around Rs 15 for every Rs 1 lakh loan, and a 50 basis points lowers the EMI by Rs 30.
The reduction could have been in anticipation of more rate cuts by State Bank of India, the biggest local lender. Indeed, SBI chairman OP Bhatt on Thursday said there was room to cut rate by another 25 basis points on loans as well as deposits.
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