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Benchmark lending was something I had never heard of.
ICICI Bank has hiked its benchmark prime lending rate (PLR) by 0.5 percentage points to 11.75 per cent with immediate effect.
The bank may be the first to hike the PLR after the RBI's quarterly review of the monetary policy last month, signalling a hardening interest rate regime.
The bank has also raised home loan rates by 0.5 percentage points. The revised fixed home loan rate is 9.5 per cent, while the floating rate is 7.75-8.5 per cent, with effect from February 13.
According to a bank official, the increase in PLR will lead to a rise in short-term corporate loans rates, which is about 10-12 per cent of the bank's total loan portfolio.
According to analysts, other private sector banks may also hike lending rates soon.
"We have increased the benchmark PLR to align deposit rates with lending rates. Our cost of funds is going up with rising deposit rates and the increase in short-term lending rates to banks by the RBI. Overnight call rates have also been going up. So, going forward, we expect the higher interest rate scenario to continue," the official said.
According to an analyst, banks' margins have been under pressure because of the growing credit offtake and higher deposit rates.
"Most banks would be tempted to raise lending rates. But the state-run banks will look at other players and also wait for signals from the biggest shareholder, the Government." This is the second time this year that ICICI Bank has raised its PLR. In early January, the bank effected a 0.25-percentage point hike.
The hike in the benchmark PLR is not likely to have any major impact because the bank's domestic corporate loan book has been flat in the third quarter. Against this, the bank had an increase of 70 per cent in its retail asset portfolio. "We are more focused on retail assets," the official said.
He also said that it was a logical step and other banks too may follow suit with hike in corporate lending rates. "Not just retail deposits, even bulk deposit rates have seen a rise. So, it is logical that lending rates will also rise."
Mr Ananda Bhoumik, Senior Director with Fitch Ratings India, said: "Though demand is sensitive to interest rates, an immediate effect is yet to be seen. Credit offtake is unlikely to be affected, as demand is backed by increase in investments and consumption."
Benchmark Lending Group Featured in Wall Street JournalSANTA ROSA, Calif. (July 20, 2005) - Benchmark Lending Group, Inc. is pleased to announce the publication of acœEasy Money, A Salesmanac Pitch,ac Wall Street Journal, July 20, 2005. This front-page article about Benchmark Lending Group highlights the companyacs| · | If you want monthly payments that are generally lower than for a traditional mortgage | |
| · | If you plan to keep your loan for ten years or less, or if you are uncertain how long you will keep your loan | |
| · | If you plan to use your home equity within seven years | |
| · | If you want the security of a fixed rate but not lose the savings that an ARM offers |
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This section provides access to:
The Benchmark Repo Lending Facility Overview section provides access to an outline of Fannie Mae's Benchmark Repo Lending Facility. The Benchmark Repo Lending Facility's goal is to enhance liquidity and trading activity in our Benchmark Securities in the cash, overnight, and term repo markets.
Fannie Mae uses the Benchmark Repo Lending Facility Tool to lend out its Benchmark Securities.
Given the recent Federal Reserve action and anticipated future federal funds increases, effective February 1, 2005, Fannie Mae will be changing its Benchmark Repo Facility lending rate from GC-75 to GC-150bps. As for near term guidance, it is likely that Fannie Mae will be raising its lending rate along with the Fed to maintain its goal of being the lender of last resort in the financing market for the repo eligible Benchmark non-callable and callable securities.