ICICI Bank, which lowered retail lending at the time of credit crisis, has reduced car loan rates and increased its dealer commissions, in order to recover its old glory as a leading retail lender, according to those in know of the subject.
The bank is said to have lowered interest rates on Car Loans to 9.75-10.5% from 10.5-11.5%. Since these are rack rates, the customer can now avail of a loan at about 9%, as dealers give a part of their commissions to the lenders. These new rates are 50-75 basis points below its competitors, and can pressurize other lenders to lower their rates in order to prevent the loss of market share.
This has come as a surprise as the interest rates are expected to move up. This is because government is considering to revoke the stimulus package due to economic recovery on the basis of strong demand that is responsible for pushing the inflation higher.
However this move may not help ICICI Bank much, as other lenders may not react to this move in a hurry.
Also ICICI Bank has raised the dealer commission to 2.25-3% from current 2%. This may force other lenders to take the similar step.