ICICI Bank has come up with a new scheme to lessen the impact of inflation on its customers. ICICI Bank, "as a customer friendly gesture", has decided to reduce its Equated Monthly Installment (EMI) and increase the tenor of the home loan. The tenor is the amount of time left for the repayment of a loan or contract or the initial term length of a loan. By increasing the number of years of repayment of the loan, the bank reduces the burden on its borrowers, though, it might not necessarily decrease the actual revenue earned by the bank.

By increasing the repayment tenor, the bank has been able to reduce the EMI on its home loans. In April 2007, the bank had increased the EMI for its customers, due to an increase of one per cent in the benchmark reference rate for its floating rate home loans in the months of February and March.

"Subsequently, we have received a lot of feedback from customers that they would prefer to increase the tenor, rather than increasing the EMI," the bank said.

Consequently, the bank said, it has cut down the EMI and increased the tenor "as a customer friendly gesture."

Banks which provide floating rate home loans, generally, hike the repayment tenor whenever there is a rise in the rate of interest. The EMI, on the other hand, is increased only if the tenor passes a certain pre-decided time-frame, where customers are not considered to be in a position to repay the loan. This limit is calculated, keeping in mind the income making age of a customer.

The new EMI amount will be applicable for the bank’s customers from April 2008.

However, there is a provision for customers to continue on the earlier scheme, without changing the EMI. All the customers who want to continue on the earlier EMI, can approach the bank, which would reset the EMI for them individually.