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Lending rates are on the way up and there seems to be no respite in sight. ICICI Bank has raised the interest rates on home and other loans by 25 basis points to counter higher cost of funds. This is a result of hike in policy rates by RBI by 25 basis points.

ICICI Bank's base rate will now be 9.5% as against 9.25% at present and will be applicable from July 4, 2011. The prime lending rate or PLR which is the benchmark for older rates and the floating reference rate has also been hiked by 25 basis points. The new benchmark lending rate will be 18.25% and floating rate will be 15.25%. A 25 basis points increase in lending rates would push the EMI on a 20 year and 30 lacs home loan by around Rs 500.

Due to this hike, SBI and HDFC home loans will be cheaper compared to ICICI Bank by 25 basis points. However, this may just be the cue for other banks to follow.

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