Seeking to mitigate inflationary pressure in a rising interest rate scenario, the country's largest private sector lender ICICI Bank has decided to rather increase the repayment tenor for its home loan customers while cutting down their monthly installment amount.

In an advisory sent to its home loan customers, the bank has said that "as a customer friendly gesture" it has reduced their Equated Monthly Installment (EMI) and increased the tenor of the loan.

The bank had previously increased the EMI for its customers in April 2007, following an increase of one per cent in the benchmark reference rate for its floating rate home loans in February and another one per cent rise in March same year.

"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."

Floating rate home loan providers, generally, increase the repayment tenor first in case of a rise in the interest rate, and the EMI is hiked only if the tenor goes beyond a pre-defined timeframe, where customers are not considered to be financially in a position to repay the loan. This limit is mostly linked to the income-making age of a customer.

ICICI Bank said that the new EMI amount for its customers would be applicable from April 2008.

The lender further added in the advisory that if a customer wanted to continue with the existing EMI, the borrower can approach the bank for resetting the EMI.

Mumbai-based bank in March 2007 increased floating reference rate to 12.75 per cent per annum and benchmark advance rate (I-BAR) 15.75 per cent per annum payable monthly as against 14.75 per cent.