ICICI Bank cuts home loan rates to 8.65%

Mumbai: ICICI Bank, which is among the top three home loan providers, has cut its home loan rate by 45 basis points (100bps = 1 percentage point) to 8.65% from 9.1% earlier. The bank has also reduced its benchmark rate — the one-year marginal cost of lending rate (MCLR) — by 70 basis points to 8.2% from 8.9% earlier. Following the rate reduction, the private bank's home loans are available 5bps higher than SBI's best rate of 8.6%.

The best home loan rate is available to borrowers which include a woman and is for an amount below Rs 75 lakh. The country's largest housing finance company HDFC is also expected to announce a rate revision soon.

With cost of funds coming down on the back of a surge in deposits due to demonetisation, many banks are reducing their lending rates. On Monday, Kotak Mahindra Bank announced a cut of up to 0.45% in its lending rates. Public sector lender Dena bank slashed its benchmark lending rate by 0.75%. Another nationalised institution, Oriental Bank of Commerce (OBC), announced that it has slashed its 1-year MCLR by 80bps to 8.6%. While Kotak Mahindra Bank has cut MCLR by 0.20% to 0.45% across tenors, Dena Bank's MCLR now stands at 8.55% for a one-year tenor.

A day after Prime Minister Narendra Modi exhorted banks to prioritise lending towards poor and lower middle class, SBI had cut its MCLR by a steep 0.90%. Some smaller banks like State Bank of Travancore and IDBI Bank had already announced MCLR cuts in the last week of December. Banks have moved to MCLR as their new benchmark lending rate from April 2016, replacing the base rate system for new borrowers. It is calculated on the marginal cost of borrowing and return on net worth for banks. It was introduced by the RBI to ensure better transmission of its policy actions.

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