The Hindu Business Line : More banks closer to raising rates

Private sector Centurion Bank Ltd on Thursday announced a 25 basis point to 75 basis point hike in deposits across maturities effective from November 19.

Deposit rates of the bank now stand between 4.00 and 6.50 per cent for different maturities. However, the bank decided to leave its prime lending rate (PLR) unchanged at 11.50 per cent per annum.

"PLR does not impact our yield on advances. More than 80 per cent of our advances are in the retail sector. Our PLR was already high, so we decided to maintain it at the same level," said Mr Anuj Kumar, Head-Strategic Planning, Centurion Bank.

Centurion Bank's move to raise deposit rates follows ICICI Bank's lead earlier this week, when the latter raised its deposit rates by between 25 basis point-0.75 basis point and raised its PLR by 50 basis point to 10.50 per cent. Recently, ICICI Bank had also hiked up home loan rates by 75 basis points on fixed rates loans and 50 basis points on floating rate loans.

Over the past couple of weeks, a number of banks marked up deposit rates by around 25-50 basis points, including Bank of India, Indian Overseas Bank, Bank of Baroda, Union Bank of India and UCO bank, IndusInd Bank and UTI Bank.

The tightening of liquidity conditions in the domestic debt markets coupled by a good spurt in credit offtake make a case for increasing lending rates, according to analysts.

Foreign banks are also understood to be reviewing their respective interest rate structures.

Speaking to newspersons here today on the sidelines of a function to launch Microcredit 2005, Mr Sanjay Nayar, CEO, Citibank India, said that although the bank is reviewing lending rates, it was not in a hurry to raise them immediately.

The bank is also considering hiking rates on its home loan products following a rise in cost of funds and new risk weight norms, he said.

At another function, ABN Amro Bank's country representative (India) and Executive Director, Mr Ramesh Sobti, said, "Although there is a pressure on mortgages and other loans, at this point of time we have not taken a firm view regarding raising interest rates. But when the time for hike comes, home loans rates will be the first to rise. The hike might be in the band of 25 to 50 basis points."

The bank would look for a sustained trend in the areas of rising inflation, credit demand and tightening liquidity situation before taking a decision in this respect, he said.