ICICI Bank hikes prime lending rates by 15 bps: How will your EMIs be affected?

ICICI Bank MCLR Rates

According to the bank’s official website, the new Marginal Cost of Funds Based Lending Rate (MCLR) rates are effective from October 1, 2022. ICICI Bank has increased its MCLR by 20 bps across all tenors and now has one-month MCLR from overnight. 7.85%, 3-month MCLR is 7.90%, 6-month MCLR is 8.05% and 1-year MCLR is 8.10%.

ICICI Bank mentions on its website that “Eligible borrowers can avail home loans with attractive interest rates on both floating and fixed rate loans, low Equated Monthly Installments (EMIs) and no pre-payment charges on floating loan rates More easy repayment options are being offered with an extended loan tenure of up to 30 years.

ICICI Bank External Benchmark Lending Rate

The bank has mentioned on its website that “ICICI Bank External Benchmark Lending Rate” (I-EBLR) is referred to the RBI policy repo rate with mark-up on the repo rate. I-EBLR is 9.25% ppm with effect from 30th September, 2022. ,

For customers who have a home loan, their EMIs will increase as a result of the increase in their interest rates. However, the benchmark to which your loan application is linked will affect it. ICICI Bank says that “A floating rate of interest is linked to a benchmark rate. As per RBI guidelines, floating rate home loans from banks are linked to external benchmark rates. ICICI Bank’s floating interest rate is linked to the repo rate announced by RBI from time to time. So, your home loan interest rate changes in line with the repo rate. Consequently, depending on the change in the interest rate, the EMI or the tenure of your loan will increase or decrease.”

For home loan of Rs. 75 lakh in ICICI Bank, the floating interest rate for salaried borrowers ranges from 8.1% to 8.85%. Rate of interest for loans above Rs. 75 lakh is 8.1–8.95%. For self-employed borrowers, home loan up to Rs. 75 lakh is between 8.20% and 9.00%, and is for loans above Rs. 75 lakhs, it is between 8.20% and 9.10%.

ICICI Bank has stated on its website that “As per the “Master Direction – RBI (Interest Rate on Advances) Directions, 2016, the interest rate under the external benchmark shall be reset at least once in a month. Thus, the interest rate repo will be The rate component will be reset on the first day of the third month following the month in which the facility is first disbursed (irrespective of the date of disbursement) and every three months thereafter, as amount of repo rate + “spread”, plus Applicable statutory levies, if any. The applicable repo rate will be the prevailing rate of one business day prior to the reset date.”

“As per the Master Direction – RBI (Rate of Interest on Advances) Directions, 2016, floating rate loan means a loan on which the interest rate does not remain constant during the tenure of the loan. Hence, in case of floating interest rate loan, the loan As per RBI guidelines, floating interest rate loans linked to external benchmarks should be reset at least once in three months,” ICICI Bank said on its website. Said under the question section.

How much will your EMI increase?

If the effective repo rate increases as on the reset date, the effective ROI of the loan account will also increase, which will have an impact on the EMI and tenure of the loan. Accordingly, the interest on home loan EMIs in ICICI Bank will increase as well as a result of the new hike, which is 15 bps. Considering a customer who availed a home loan for Rs. 50 lakhs with a tenure of 20 years. If, for example, the borrower’s home loan had a previous interest rate of 9.10%, the new rate after an increase of 15 bps would be 9.25% per annum. 50 lakh home loan with tenure of 20 years at an external benchmark lending rate of 9.10 percent interest rate on Re 1, customer will have to pay EMI 45,308, but after an increase of 15 bps in ICICI Bank’s EBLR rate to 9.25% p.a., your EMI will increase 45,793 which in turn increases your interest amount 59,90,401 and hence the total amount payable will be 1,09,90,401.