The Hindu Business Line : PNB hikes lending rate

Punjab National Bank on Thursday announced a 25 basis point hike in its benchmark prime lending rate (PLR) to protect its net interest margin. The PLR would now go up from 11.5 per cent to 11.75 per cent with effect from January 1 next year.

The move to hike PLR comes in the wake of the recent increase in deposit rates and also due to tighter liquidity conditions.

PNB had, on December 22 this year, increased deposit rates by 25-75 basis points for different maturities. Mr S.C. Gupta, Chairman and Managing Director of the bank, had on Saturday last maintained that there was no plan to hike PLR and that only sub-PLR rates would be realigned.

But the CRR hike and advance tax payments by corporates for December 15 instalment has led to a spurt in the call rates in the recent days and tightened liquidity conditions. Call rates have almost doubled since the RBI's announcement of a two-stage CRR hike. The first leg of the CRR hike has already come into effect from Saturday and the next stage would come into effect from January 6 next year.

However, unlike certain banks, PNB had not tapped the call money market for conforming to the new CRR requirements, Mr Gupta told Business Line recently.

A PNB official told this paper on Thursday that although the bank had indicated that it had no immediate plans to hike PLR, the turn of events in the last few days and the need to protect shareholders' interest had prompted it to go in for the PLR hike. PNB had last increased its PLR by 25 basis points to 11.5 per cent on August 1 this year.

Asked whether the latest PLR hike had any implications for home loan rates of the bank, the official replied in the negative and pointed out that the home loan rates are not linked to the benchmark PLR.

More Stories on : Interest Rates | Public Sector Banks | Punjab National Bank

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