ABN ups home loan rates 25 bps

ABN Amro Bank has decided to raise its home loan rates by 25 basis points effective July 21. The finance minister's statement questioning the rise in lending rates may have deterred public sector banks from hiking their home loan rates.

However, foreign banks have decided to follow the trail of ICICI Bank and Housing Development Finance Corporation, which raised their home loan rates across the board by 50 basis points earlier this month.

Romesh Sobti, executive vice president and country representative, ABN Amro Bank NV (India), said: "We will hike our home prime lending rate (HPLR) by 25 basis points, bringing it to 7.25 per cent. The spread on home loans will remain the same at 50 basis points."

This means ABN Amro's floating rate loan will now work out to 7.75 per cent, which works out on par with the leading home loan majors.

Sobti said secure loans such as home loans and auto loans operate on wafer-thin margins. "The competition in the industry has brought them close to non-viability, especially in the case of auto loans," he added.

In unsecured form of lending, the margins are as high as 4 to 5 per cent as in the case of personal loans and credit cards businesses, thereby not requiring any hike in rates at this point in time. "However, delinquencies are equally high at about 4 per cent," he was quick to add.

ABN Amro had earlier hiked its auto loan rates, which today stand at around 8 to 8.5 per cent depending upon the tenor. To ensure viability of auto loans, the Netherlands-based foreign bank took a conscious decision not to sell through dealers.

"We only sell loans through our branches, which gives us adequate room to cut rates if required," said Sobti.