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Banks have started passing on the Tuesday's hikes in the repo rates and the savings bank deposit rate by the Reserve Bank of India.
Banks are raising their lending rates even as they are holding their deposit rates to protect margins. On Tuesday, the RBI hiked the repo rate and the savings bank deposit rate by 50 basis points each to 7.25 per cent and 4 per cent, respectively.
On Wednesday, Punjab National Bank decided to raise its Base Rate and Benchmark Prime Lending Rate (BPLR) by 50 basis points each to 10 per cent and 13.50 per cent respectively. From July 1, 2010, banks have been lending at a spread over the base rate. Before this, they were lending with reference to the BPLR, at negative or positive spreads , depending on the customer.
The RBI directed that banks switch to the base rate system of loan pricing from the BPLR as lack of transparency in the latter hindered transmission of monetary policy signals.
Oriental Bank of Commerce and Bank of Maharashtra too announced raising their base rate and BPLR by 50 basis points each to 10 per cent and 14.25 per cent respectively.
Private sector YES Bank increased its base rate and BPLR by 50 basis points each to 9.50 per cent and 19 per cent respectively.
IDBI Bank was the first bank to raise its base rate and BPLR by 50 basis points each to 10 per cent and 14.50 per cent respectively within hours of the RBI action on Tuesday.Meanwhile, Canara Bank said it would be hiking its lending rates very shortly. Its base rate is at 9.5 per cent. Mr S. Raman, Chairman and Managing Director, Canara Bank, told Business Line , the rate hike announced by the RBI will be passed on to customers. The bank's Asset Liability Committee is expected to meet in a day or two to decide on the hike. He said the bank had absorbed the 25 basis point hike in the repo rate in March.
Bank of Baroda: Mr M. D. Mallya, Chairman and Managing Director, Bank of Baroda, said the message given by the RBI is to increase the lending rate. The bank's Asset Liability Committee will meet in the next couple of days and decide on the rate hike. Bank of Baroda's base rate is 9.5 per cent.
Indian Overseas Bank: Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, said the rate hike would have to be transmitted but whether to transfer it fully or not would have to be decided after looking at other banks.
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