By Sumit Sharma, Bloomberg
MUMBAI: ICICI Bank, India’s biggest lender by market value, expects retail loan growth to slow after it raised rates last month.
“If the rate of growth changes, it is because of a combination of base effect and (increase in) interest rate,” K.V. Kamath, ICICI’s chairman, told reporters in Mumbai today. “What would have slowed down otherwise has slowed faster.”
ICICI raised interest rate on consumer loans last month, joining rivals in reacting to the rising costs of borrowing. The Reserve Bank of India, the central bank, on 31 January raised its key overnight rate by a quarter of a point to a four-year high of 7.5% to contain inflation. On 13 February, it told banks to set aside 6% of funds as reserves starting 3 March, up from 5.5%.
Demand for loans from companies isn’t expected to slow and bad loans aren’t expected to rise because of the increase in the lending rate, Kamath said.
“As of now, higher interest rates are not impacting credit quality,” he said.