Three major lending banks, including ICICI Bank, on Friday announced an increase of 25 basis points, or 0.25 percent, in lending rates, making auto, home and corporate loans more expensive for borrowers. State-owned Indian Overseas Bank and Dena Bank are the other banks who have increased their lending rates by similar margin. The rate hike will increase the cost for those who had taken advances on floating rate of interest.
The move comes within weeks of the Reserve Bank of India (RBI) increasing in key lending (repo) and borrowing (reverse repo) rates by 25 basis points to tame rising inflation.
The ICICI Bank has decided to increase its base rate (I-base) by 25 basis points to 9.50 percent with effect from Monday. The release addedthat the interest rates on all new loans are being determined with reference to the I-base rate. The bank also announced to increase the benchmark prime lending rate by 25 basis points. The decision would impact the customers who had taken loans from the ICICI Bank on floating rate of interest.
“The fixed rate customers will not be impacted by the …increase and their contracted rates will remain unchanged”, ICICI Bank said on Friday.
Since base rate came into effect last year, lenders like HDFC Bank and Axis Bank have increased their rates by 200 bps. With today’s increase, ICICI has also raised its rates by 200 bps.
The benchmark prime lending rate of the Chennai-based IOB will go up from 14.25 percent to 14.50 percent with immediate effect. IOB in a filing to the Bombay Stock Exchange (BSE) said “The Board of Directors has approved the increase of the Benchmark Prime Lending Rate (BPLR) of the bank by 25 basis points from existing 14.25 per cent to 14.50 per cent.”
Dena Bank decided to raise its base rate by 25 basis points to 10.20 percent and its benchmark lending rate by a similar margin to 15.25 percent. The new rates will be effective from Saturday.
Private lender Dewan Housing Finance Corp also announced an increase of 25 basis points in its retail prime lending rate.
Since the RBI had raised its key policy rates by 25 bps at its mid-quarter policy review on 16th June- the 10th hike since March 2010 — many banks have hinted at hiking their lending rates.
On Thursday, the Bangalore-based state-run lender Canara Bank became the first lender to increase rates, when it announced 25 basis points hike in base rate and lending rates to 10.25 percent and 14.50 percent, respectively.
With the private sector leader ICICI Bank announcing rate hike, many more banks in the public and private sector are expected to announce similar increase in their lending rates.