Home, auto, personal loans get costlier as banks hike interest rates

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 Home, auto, personal loans get costlier as banks hike rates
ICICI Bank: Quotes, News
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Lending rates in the economy have begun rising with India's largest private sector bank now joining the list of banks hiking lending rates. Joining ICICI Bank was India's largest housing financial institution HDFC, which increased interest on floating home loans.

Interest on housing loans from HDFC for housing loans upto Rs. 30 lakh will go up to 10.40 per cent from the existing 10.15 per cent.

ICICI Bank has hiked its lending rate by 25 basis points to 10 per cent.

Private lenders HDFC Bank, Axis Bank, Kotak Mahindra Bank and Yes Bank have raised interest rates by 20 to 25 basis points of late. Among the public sector lenders, only small-sized Andhra Bank has hiked the base rate so far and it is likely that they might hikes rates too.

It may be recalled that RBI took a number of measures recently to drain liquidity in the system to help battle the falling rupee. However, this has led to cost of funds going up for banks, which is why they are hiking interest rates. 

In a surprising move last month the RBI hiked the marginal standing facility for banks (MSF) to 10.25%, indirectly pushing interest rates higher.

Under the MSF banks were borrowing from the RBI at repo rate, plus 1 per cent, which effectively meant 8.25 per cent. But, with effect from July 17, banks would now have to borrow at 10.25 per cent, which is a good 2 per cent over and above the existing rates.

This along with the proposed open market sales of government securities has drained liquidity and push interest rates in the system higher.

With inputs from PTI.

Read more about: hdfc, icici bank, interest rates
Story first published: Friday, August 23, 2013, 8:44 [IST]
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