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ICICI offers lower EMI-increased tenure option to some home loan customers

ICICI offers 'lower EMI-increased tenure' option to some customers

Apnaloan.com Research Bureau

12 May 2008

Though ICICI bank is still holding on to the rate cuts, it has offered lower home loan installments to some of its housing loan borrowers.

Some loan borrowers have received letters from ICICI Bank which inform them that in what is being called as a 'customer-friendly gesture', the loan tenure is being increased for these borrowers, thus lowering the EMIs.

In February and March 2007, many home loan borrowers who had taken loans from ICICI Bank had to shell out higher EMIs as a result of hike in their benchmark reference rate or the prime lending rate (PLR) for floating rate borrowers.

Following the hike, the bank is said to have received feedback from consumers where they said they would prefer to pay for a longer loans period than pay a higher EMI. However, this option has been offered to only those borrowers who have maintained a good repayment track record. The option where the borrowers who wish to continue paying the EMI without an increase in tenure has also been retained.

While most industry observers attribute this move to retain and boost business, ICICI sources decline the same. According to observers, ICICI bank did not cut rates when other banks reduced them in January-February 2008. This instigated a shift of many ICICI home loan borrowers to public-sector banks. To put a stop to such moves, the bank is said to have offered the option of reduced EMI-increased tenure option.

However, according to ICICI sources, the interest rate cut offered by public-sector banks did not really help the consumers much the consumer has to pay a pre-payment charge to switch lenders, thus negating the benefit of reduced interest rates.