In a clear signal of a rising interest rate regime, country’s largest private sector lender, ICICI Bank, on Thursday said it has hiked its auto loan rates by up to 0.5 percent and withdrawn its 8.25 percent special home loan scheme. “Auto loans rack rates have been raised by 0.25-0.5 percent depending on segment and tenor with effect from March 5,” an ICICI Bank spokesperson said.

Though the bank did not give any reason for the rate hike, industry experts said that the rate increase was largely prompted by signals communicated by the Reserve Bank in its last monetary policy review.

With a view to suck out excess liquidity from the system, the RBI hiked the cash reserve ratio or the amount banks have to keep with RBI for zero interest by 0.75 percent to 5.75 percent, absorbing Rs 36,00 crore from the system.

Following the hike, interest rates for new auto loans will now be in the range of 9.75-11 percent.

ICICI Bank also withdrew its special home loan scheme, under which it offered home loans for 8.25 percent fixed rate for two years, effective from March 1, the spokesperson added.

On home loans, ICICI bank is currently offering home loans for up to Rs 30 lakh at 8.75 percent, loans between Rs 30 lakh to Rs 50 lakh at 9 percent and those above Rs 50 lakh, at 9.5 percent.

Another private sector lender, Kotak Mahindra Bank and the group’s car loan financing arm also announced hikes in their home and car loan rates respectively on Thursday.

While Kotak Mahindra Bank has hiked its home loan rates by 0.25-0.5 percent with effect from February 18, Kotak Mahindra Prime, which is the dedicated car financing arm of group, has hiked its loan rates by 0.5-0.75 percent.

“We decided to hike the interest rates for home loans by 0.25-0.5 percent. This is primarily to align lending rates in line with the cost of deposits,” Kotak Mahindra Bank’s Head of Retail Assets, Kamalesh Rao, said.

The bank’s home loan portfolio grew by 50 percent in the current year, he said.

Kotak Mahindra Prime’s Chief Executive Officer, Sumit Bali, said the hike in lending rates will come in to effect from March 8. “We are hiking the lending rates as the cost of funds have gone up by up to 0.75 percent. We have to pass on this additional cost to customers, which we didn’t do last month,” Mr. Bali said.

KMP has a total loan book of around Rs 6,500 crore, which grew by around 35 percent in the current financial year. Moving ahead, the company expects a loan growth in the range of 15-20 percent, he said.

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