Banks have begun to increase deposit and lending rates a day after the Reserve Bank of India increased the repo rate by 40 basis points.

ICICI Bank and Bank of Baroda have raised the lending rates and more lenders are expected to make announcements soon. The hike in lending rates by banks would lead to costlier EMIs.

In good news for the fixed deposit holders, ICICI Bank and Kotak Mahindra Bank also announced hike in the rates for these instruments.

Private sector lender ICICI Bank increased the external benchmark lending rate (EBLR) by 40 basis points.

“ICICI Bank External Benchmark Lending Rate” (I-EBLR) is referenced to RBI Policy Repo Rate with a mark-up over Repo Rate. I-EBLR is 8.10 per cent p.a.p.m. effective May 4, 2022,” it said on its website.

It has also increased the interest rate on fixed deposits between ₹2-5 crore by 25 basis points.

BoB hikes rates

Bank of Baroda, too, has revised the rate of interest on various retail loans liked with Baroda Repo Linked Lending Rate (BRLLR) by 40 basis points effective Thursday.

For retail loans, applicable BRLLR is 6.9 per cent with effect from Thursday. This is based on the current repo rate of 4.4 per cent along with a mark up of 2.5 per cent, SPO 2.5 per cent.

FD rates inches up

Kotak Mahindra Bank  announced a rate increase in fixed deposit across multiple tenor baskets for retail customers. The increase is effective from May 6 on all deposits below Rs 2 crore, it said.

For tenor bucket up to 390 days, the bank has hiked FD rate by 30 bps to 5.5 per cent and for tenor bucket of 23 months by 35 bps to 5.6 per cent. Senior  citizens would get 50 bps higher interest.

Axis Bank on its website announced a revision in its Fixed Deposit Plus product of ₹2 crore and above, effective Thursday.

The RBI had also raised the cash reserve ratio by 50 basis points from 4 per cent to 4.50 per cent

However, experts believe that the higher rates would not deter demand much for consumers who are looking to purchase goods or homes.

Harshad Chetanwala, Co-founder of MyWealthGrowth.com, said, “EMIs will go up as all banks will increase interest rates. But people had got the advantage of low interest rates for a long time. The hike will not have a impact on borrowers as they would have factored in the interest rate hike when planning their purchases. The good news is that FD rates have also started increasing.”

However, one should still not rush to lock their investment in long-term instruments and follow a gradual approach., he said.

Shanti Ekambaram, Group President - Consumer Banking, Kotak Mahindra Bank  said, the rate hike will not have much impact on demand.

“By itself this may not impact demand significantly, that is, coming off the base of low interest rates. We will wait and watch as further action unfolds,” she said.

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