ICICI Bank, the country's second largest bank, today raised home loan rates by 50 basis points within a week after saying it would wait till the end of June 2006 to decide on further hike in interest rates.ICICI Bank followed market leader, Housing Development Finance Corporation (HDFC) and third largest home loan provider, State Bank of India (SBI), in effecting second increase in home loan rates in 2006. All three had raised rates in February-March 2006 by similar margins.HDFC earlier this week increased rates by 50 basis points across the board, while SBI raised its home loan rates by 25 to 50 basis points.Chanda Kochar, deputy managing director, ICICI Bank, said: "We raised home loan rates by only 50 basis points in February against 100 basis points increase in deposit rates. We now realised the bank will not be able to absorb the cost and has to pass it on to borrowers."ICICI said the floating rate on home loans has been increased to 9% from 8.5% and fixed rate to 10.25% from 9.75%. ICICI Bank charges a risk premium of 25-50 basis points based on the borrowers' credit quality. The bank's home loan prime lending rate (PLR) has now increased to 9.75%.Last weekend, ICICI Bank's managing director and CEO K V Kamath had stated that the bank would "wait and watch" till the end of the first quarter of 2006-07 before taking any decision on any additional rate hikes.In February, the bank had stopped offering home loans at discounted rates to borrowers with a high credit quality.Banking analysts expect ICICI Bank to further increase interest rates on corporate loans as well as cost of funds for the entire banking industry continues to rise. It raised its PLR for corporate lending by 175 basis points in three phases to 12.75% during January-March 2006.
