"Every bank has to raise interest rates on consumer loans in the backdrop of increasing cost of funds in order to survive," Chanda Kochhar, deputy managing director of the country's largest private sector bank said.

"We always maintain that if the cost of funds go up, we will have no option but to pass it on to the consumers...we have to maintain net interest margin (NIM), Kochhar said."

ICICI Bank has hiked home and other retail loans by one per cent with effect from Friday and interest rates on fixed deposits of less than Rs 1 lakh of a five-year tenure by 1.25 per cent.

ICICI Bank and HDFC, another private player, together account for nearly over 60 per cent of home loans. However, HDFC has earlier said it would not go for a hike at the moment. Public sector banks accounted for about 25 per cent of home loans.

Justifying the hike, ICICI Bank had earlier said deposit rates were sharply going northward, resulting in rise in cost of funds.

Meanwhile, complying with Union Finance Minister P Chidambaram's directive, public sector banks have so far desisted from hiking interest rates on home loans.

Industry analysts said home aspirants are making a beeline for PSBs, which are currently offering home loans at least one per cent lower than the private sector banks. Asked whether she anticipates any further hike in cost of funds, Kochhar declined to comment.

Earlier, the RBI raised repo rates several times in the last one year and directed public sector banks to go slow on the home loans front to check an asset bubble. Home loans are increasingly becoming dearer to consumers, who are facing the burnt of the rate hikes.