One more example of ICICI bank being not transparent:
Like all Home Loan customers, I was keenly watching the news for Home Loan rate cut. After P. Chidambaram urged banks to cut their interest rate for existing customers, I was hoping that ICICI will heed to ex-FM’s advice. Other banks like HDFC cut is by 50 basis points but ICICI doesn’t. The new CEO only "hints" at reducing it when others have taken it up.
On 20th Dec, I decided to prepay some of my existing principal and walked into Pune, Ghole Road branch. There I was treated very politely and couple of executives explained me everything. There seem to be an offer to convert your floating rate Loan to a lower interest rate. They do this by the way of something called "Variance". If you haven’t noticed till now, "Variance" is the one which is deducted from RPLR (Retail Prime Lending Rate) to give your interest rate for the Loan (RoI = RPLR - Variance, eg. 12.5 = 13.5 (RPLR) - 1% (Variance)). The fee for this conversion is going to be 0.562% of outstanding principal which will reduce your variance by 1% making 13.25 % to 12.25 % even without RPLR change. So, for an outstanding of 15 lakhs, it will be Rs. 8340. This seem to be an apparently lucrative offer because any future reduction in RPLR will be taken into account. I did a basic calculation and found that one saves ~1.75 lakhs over 15 years for 15 lakhs. Rs. 8340/- today maynot grow to Rs. 1.75 lakhs in 15 years
But the catch is that this scheme is not published and is being offered only to folks walking into prepay their loans. Now, I don’t understand are they doing this? Why can’t they offer it to everyone with or without prepayments? Moreover, the offer is only upto 27th Dec. I tried to search for a forum where this is discussed but did not find it anywhere.
So, folks you can inquire with your local ICICI Home Loan office whether this offer is true? Also if people could comment on whether one should go with above offer?