Banks hike base rate – Indian Bank, PNB, OBC, BoM
The central bank raised short-term lending (repo and reverse repo to 7.25% and 6.25% respectively). RBI has asked banks to set aside more money for bad loans, increasing provisions by up to 10%. Also, interest rates on savings deposits were increased by 50 bps to 4%, the first such raise in 19 years. Bank savings deposit rate is currently regulated by the Reserve Bank.
Banks one after another are raising their base rates and Benchmark Prime Lending Rate (BPLR) making all loans (home loans, Car loans etc.) costly for both new and existing auto, home and corporate borrowers.
Indian Bank raised its lending rates by 50 bps. Thus making it Base Rate from 9.50% to 10% per annum, it’s BPLR to 14.25% from 13.75% earlier. The new rates would be effective from 5th May 2011.
Punjab National Bank (PNB) raised its lending rates by 50 bps making its Base Rate from 9.5% to 10% and BPLR to 13.50%.
Oriental Bank of Commerce (OBC) increased its rate by 50 bps thus pushing its Base Rate from 9.5% to 10% and BPLR to 14.25%.
Bank of Maharashtra hiked its lending rates by 50 bps making its Base Rate from 9.5% to 10% and BPLR to 14.25%.
IDBI Bank also raised its lending rates by 50 bps making its Base Rate from 9.5% to 10% and BPLR to 14.50%. The bank would also hike the retail term deposit rates by 25-50 bps in different maturity buckets.
For IDBI, which hiked retail term deposit rates, a fixed deposit with IDBI Bank for 46-90 days will earn higher interest of 6.50%, up from existing 6%, while 91 days-6 months term deposit rates would go up by 25 bps to 7.75%. At the same time 270 days-1 year fixed deposit rate will go up by 50 basis points to 8.50% and term deposit with 500 days maturity will earn 9.50%, up 25 basis points from existing rate. Watch dharti punjabi movie
YES Bank also increased its lending rate by 50 bps making its Base Rate from 9% to 9.5% and BPLR to 19%. The bank also has increased the Savings Account deposit rates by 50 bps to 4% benefiting small savers.
Canara Bank raises base rate, BPLR by 50 bps each. Thus its base rate stands at 10% and BPLR 14.25% effective 5th May.
Industry players said other public and private sector lenders, including the State Bank of India and ICICI, Bank of India, Bank of Baroda, Indian Overseas Bank, Development Credit Bank Ltd (DCB) and Dhanlaxmi Bank Ltd would increase base rates and BPLR by 25-50 bps over the next few weeks. Currently, SBI’s base rate stands at 8.5%, while that of ICICI Bank, is at 8.75%. Dhanlaxmi Bank is likely to hike its base lending rate from 9.25% to 9.75% next week.
Deposit rates are also going to go up by 25-50 basis points, as bankers attempt to retain investors.
While a bank cannot lend below its base rate, the benchmark prime lending rate is used for determining interest rates on loans sanctioned before June 30, 2010. To bring in more transparency, the benchmark prime lending rate was replaced by the base rate in July last year.
Bankers said that the increase in the base rate and BPLR was in “response to the changing macro economic scenarios and policy measures adopted by the RBI” and not because “the cost of funds had gone up”. But bankers and analysts feel that hike in lending rates is likely to affect loan demand.
Note: One basis point is one-hundredth of a percentage point.
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