ICICI Bank set for fresh round of rate hikes

ICICI Bank, the country's second largest commercial bank, is set for another round of lending rate hikes. Sources said the hikes would be announced on Saturday.

ICICI Bank CEO and Managing Director KV Kamath told a TV channel that it would hike rates soon.This will be the fourth round of hikes in lending rates by ICICI Bank this year.

It raised its corporate prime lending rate by 100 basis points from 11.75 per cent to 12.75 per cent in March; 50 basis points in early February and 25 basis points in early January.

One basis point is one hundredth of a percentage point. Following the hike, the bank's corporate loan as well as retail loans, including home loans, will be costlier.

Even though ICICI Bank has been hiking its lending rates periodically to protect its net interest margin (the cost differential between deposits and loans) since the beginning of the calendar year, the public sector banking industry has started raising rates only recently.

Bank of Baroda was the first to hike its prime lending rate (PLR) last week. Most of the public sector banks, including industry leader State Bank of India, since then have hiked their PLRs. Housing Development Finance Corporation (HDFC), too, has hiked its home loan rates.

"The situation can change for the worse. Once the state elections are over, there will be an oil price hike. That will put pressure on the inflation rate," said a banking analyst.