Oriental Bank partially stays home loan rate increase

Our Bureau

New Delhi, Aug. 7

Less than a fortnight after the Finance Ministry's advice to public sector banks asking them to consult their boards before hiking any lending rates, two banks Bank of Baroda and Andhra Bank on Monday held their board meetings in the Capital and decided to stay with their recent prime lending rate (PLR) hike decisions they had taken earlier.

Another bank, Oriental Bank of Commerce (OBC), which also had a board meeting here on Monday, decided to keep in abeyance till September 30 a part of its earlier announced rate hike on home loans.

Consequently, till September 30, there will be no change in interest rates on home loans up to Rs 20 lakh. However, effective Tuesday, home loans above Rs 20 lakh would attract the higher rate announced by OBC earlier, Mr K.N. Prithviraj, Chairman and Managing Director of the bank, told newspersons here.

"The board's decision to keep in abeyance the rate hike on home loans up to Rs 20 lakh will have minimal impact on our profits. We will use this period to look at the default rate in our home loan portfolio and, accordingly, take a view on September 30. Our response on that day will depend on our portfolio analysis," he said.

OBC has not gone in for a PLR hike after April this year, and, therefore, there was no question of the board reviewing any decision on PLR hike in the wake of the Finance Ministry's letter of July 28. Hence, there is no change, as of now, in lending rates for other sectors.

On the other hand, Bank of Baroda (BoB) had on July 31 announced increase in its benchmark PLR by 50 basis points from 11 per cent to 11.5 per cent with effect from August 1. Andhra Bank, too, had raised the PLR by 50 basis points from 11 per cent to 11.5 per cent.

The Andhra Bank Chairman and Managing Director, Mr K. Ramakrishnan, said that the board at its meeting today ratified the PLR hike from 11 per cent to 11.5 per cent.

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Rate hike: SBI board to meet next week
PLR hike: Banks in a fix
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(This article was published in the Business Line print edition dated August 8, 2006)
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