PSU banks Rise lending, deposit rates
Bank lending and deposit rates have begun to move up in response to the 25-basis points hike in interest rates by the Reserve Bank of India. All eyes are now on SBI which holds the key to home loan rates.
On Monday, three nationalized banks -Punjab National Bank, Allahabad Bank, and Punjab & Sind Bank-announced an increase in their lending and deposit rates. Other lenders are expected to follow suit as the race for deposits hot up ahead of the close of the financial year. The rate hikes come in the wake of the monetary policy where RBI raised its repo and reverse repo rates-the rate at which it lends to and borrows from banks. Bankers had been hopeful that liquidity position would improve following an increase in government spending. However, instead of improving the liquidity deficit has worsened in recent days. On Monday, the shortfall in funds in the banking system represented by bank borrowing from RBI touched Rs 1, 15,335 crore. This is more than double the amount of borrowing that RBI is comfortable with.
HDFC, the largest home loan company, is keeping an eye on SBI’s lending rates. While other lenders such as ICICI Bank and LIC Housing Finance usually ensure that their rates are competitive vis-Ã -vis HDFC. SBI has hiked deposit rates on January 3 and is currently offering 9% on 555 day and 1000 day deposits.
Punjab National Bank said: “In response to the hike in the policy rates by Reserve Bank of India on January 25 in the third-quarter review of credit policy, and rising yield of market instruments, PNB has decided to hike both BPLR and Base Rate by 50 bps from 12.50% to 13.00% and 9.00% to 9.50% respectively. The bank also revised interest rates on its fixed deposits by 25 to 100 bps across various maturity buckets. With this revision, the peak rate is now 9.25% for maturity period of 1111days.
Allahabad Bank has increased its Benchmark Prime Lending Rate (BPLR) by 25 basis points from 13.25%. to 13.50% and its Base rate by 50 basis points from 9.00% p.a. to 9.50% from February 01, 2011. Besides this Bank has also launched a special deposit scheme for 400 days at a interest rate of 8.50% and 9% for senior citizens. Punjab & Sind Bank has informed the stock exchange that its Base Rate has been hiked from 9.00% to 9.50% and BPLR from 14.00% to 14.25% effective from Tuesday.
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