Cost burden forces IDBI to hike rates by 25 bps

Industrial Development Bank of India (IDBI) Bank today raised its interest rates on housing loans and other retail lending products by 25 basis points, in tune with the movement in its cost of funds.

IDBI Bank is reviewing its lending rates for corporates too, the bank's chairman, V P Shetty, told reporters today.

"The money market conditions are tight, and the hike in retail lending rates follows increase in deposit rates last month. We have raised lending rates to realign costs with the yields," Shetty said. IDBI's home loan floating rate has now increased to 8.25 per cent and fixed rate to 8.50 per cent (up to three years) and 8.75 per cent (up to five years).

IDBI's total retail loans book is about Rs 8,200 crore on January 31, 2006. Of this, home loans account for almost Rs 7,000 crore and personal loans Rs 500 crore. The increase in interest rates will apply to only new loans as IDBI Bank has not raised its prime lending rate (PLR).

Mortgage lender, Housing Development Finance Corporation (HDFC) had last night raised interest rates by 50 basis points across the board.

ICICI Bank and LIC Housing are still reviewing the "market developments". ICICI Bank had early last month raised its benchmark PLR for corporates by 25 basis points to 11.25 per cent.

IDBI Bank had also raised deposit rates by 25 basis points last month. The bank expects liquidity to remain under pressure in the current quarter ending March 2006.