RBI impact: Home, car loans to cost more

None | By, Mumbai
Jul 26, 2006 01:01 AM IST

Following Tuesday?s hike in short-term rates by RBI, home loans and consumer loans are expected to become costlier.

Following Tuesday’s 25-basis-point hike in short-term rates by the Reserve Bank of India, home loans and consumer loans (like auto loans) are expected to become costlier by 50 basis points soon.

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Bankers had been waiting for the RBI's policy announcement. “The cost of funds is clearly under pressure; we were waiting for the RBI decisions,” said a leading banker.

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Sources said HDFC was set to increase home-loan rates by 50 basis points (to 9.5 per cent for floating-rate loans and 10.5 per cent for fixed-rate loans).

But ICICI Bank is not going to increase the rate immediately. Its executive director Chanda Kochar said: “We’ll evaluate the liquidity scenario and cost of funds, and take a final decision in case our margins aren’t protected.” Currently, it was not the case, she said. ICICI Bank had increased home-loan rates by 50 basis points last month.

SC Gupta, CMD, Punjab National Bank, said the writing on the wall was clear — that interest rates would be increased. “In order to guard profitability, we’ve to protect interest margins,” he said. “As far as PNB is concerned, we’ll take a final decision in a week's time.”

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    Arun Kumar is Senior Assistant Editor with Hindustan Times. He has spent two-and-half decades covering Bihar, including politics, educational and social issues.

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