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ICICI Bank likely to cut home rates by 50 bps

BS Banking Bureau

ICICI Bank may cut interest rates on home loans by 40 to 50 basis points on the back of the Reserve Bank of India's decision to cut risk weightage on home loans from 100 per cent to 50 per cent, ICICI Bank managing director & CEO K V Kamath.

The bank plans to ride high on home loans to achieve the stipulated priority sector lending norms. It is required to meet 50 per cent priority sector lending norms on incremental loan portfolio.

Housing loans will also constitute an important part of ICICI Bank's strategy to focus on retail products.

"I can grow my overall loan book by 15 to 20 per cent by just growing the retail book, looking at the growth rate in the last quarter of 2002," said Kamath. He said ICICI Bank will have no difficulty in meeting the priority sector norms by just growing its home loan book and boosting agri-financing.

On agri-financing, ICICI executive director Nachiket Mor said the bank was working with state governments to undertake direct lending to farmers and thereby derisk the portfolio.

"We look at these two areas as focal business opportunities and not directed businesses," said Kamath.

Kamath said home loans will be driven by ICICI Bank in future as it has the maximum funding advantage.

The RBI move to halve the risk weight on residential housing loans brings down the cost of funds for banks undertaking home finance and gives them an advantage over housing finance companies.

ICICI Bank's strategy is to capture the retail potential and achieve leadership in retail financial services. Kamath pointed out that the future of the merged bank will be driven primarily through retail offerings, as the group will focus on the customer and cross-selling of products.

Home loans will not only help ICICI Bank meet priority lending norms, it will also fuel growth on the credit side.

In fiscal 2002, growth in home loans was 230 per cent, while other retail loan products witnessed a growth rate of 130 per cent. Of the merged bank's total portfolio of Rs 1,041.1 billion, retail finance accounted for eight per cent of portfolio.

According to Kamath, the bank is making money in every single retail product. "The strategy will be to expand market by not sacrificing our spreads to get a market share. In all retail products our aspiration is to be the number one in the next two years."

The bank is acquiring assets at around 300,000 customers per month. ICICI Bank's deputy managing director H N Sinor said the bank is likely to see a customer acquisition of around 350,000 customers per month.

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