ICICI offers 1% cash back on home loan EMIs in festive scheme

ICICI Bank on Friday launched a limited period offer of one percent cash back on gross EMI (equated monthly instalment) value as part of a festival scheme.

Mumbai: ICICI Bank on Friday launched a limited period offer of one percent cash back on gross EMI (equated monthly instalment) value as part of a festival scheme.

"Under this cash back offer, one percent of every EMI will be returned to the customer, apart from providing the option of renewable fixed interest rate for the entire tenure free of cost," the bank said.

Customers can choose to avail of this cash back offer either in the form of a credit to their account or in the form of a principal pay-down, it added.

The offer will run through the end of December for new customers. The scheme covers renewal/switchover of fixed/floating rate loans without any processing fee, ICICI Bank Executive Director and Retail Business Head Rajiv Sabharwal told reporters in a conference call.

The cash back money could be credited to the borrower's account or adjusted against the principal outstanding from the third year including the first two years' dues, and by the end of the fiscal from fourth year onwards, Sabharwal said.

When asked whether the bank has priced in the impact of the new offering on the margins, he said, it will be negligible and that the focus is on customer retention by rewarding loyal customers.

As credit pick-up remains lukewarm, many banks have launched attractive schemes to woo customers in.

Last month, its rival Axis bank launched a scheme wherein a home loan borrower will get 12 EMIs waived if he/she remains with the bank for 15 year or more.

Many state-run banks, including SBI, UCO Bank, Vijaya Bank, and Central Bank, have hit the market with combo loan offers, wherein a home loan customer gets a car loan without the process fee, apart from slashing interest rates by up to 0.50 percent and the processing fee by half.

According to ICICI bank, the offer can hugely benefit the borrowers. For instance on a 20-year loan of Rs 50 lakh, priced at 10.50 percent, a customer can gain as much as Rs 1,19,806 in cash back or if it is adjusted against the principal outstanding, the accrued benefit will be Rs 3,63,538 at the end of the loan repayment.

Sabharwal also said the offer includes an option to remain on fixed or floating rate at no cost.

Asked whether this could be considered a dual rate product he said, "to some degree yes, as the pricing varies from year to year, but not in the strict sense of the word as there is no differentiation in the pricing between a fixed customer and a floating rate one."

When asked whether this will be considered by the regulator as a teaser product, he replied in the negative stating there are no differential rates between fixed and floating products as also there is no cut-off period for pre-payment.

For the first time, customers have also been given the option to renew their fixed rate loans for tenures of two/three/five years at a zero conversion fee within 30 days of completion of the initial fixed rate tenure.

They can also choose to renew this multiple times till the completion of the tenure mad that if a customer decides against renewing, the loan will move to floating rate by default.

Under the new scheme, the bank is pricing it as low as 10.25 percent for a two-year loan, which will increase to 10.50 percent in the third year and 10.75 percent in the fourth year.

In the September quarter, the bank reported its best ever quarterly numbers with a 30 percent rise in net profit at Rs 1,956 crore. During the period the bank saw its home loan book grow at 12 percent.