BoB hikes rates by 50 basis pts

Mumbai, April 28 | Updated: Apr 29 2006, 05:30am hrs
In what could be a strong signal to the end of soft interest regime, state-run Bank of Baroda (BOB) on Friday became the first bank to hike its lending rates after the announcement of the annual monetary policy 2006-07 earlier this month. Other banks may follow suit.

Bank of Baroda increased its prime lending rates by 50 basis points to 11%. The revised rates would be effective from May . However, the interest rates for agricultural advances below Rs 2 lakh have been left untouched.

AK Khandelwal, chairman and managing director, BOB said, "We do not intend to put a halt to productive credit. The hike in lending rates in primarily meant to re-price the loans given at a lower rate of interest. He further added that a hike in home loan rates would not affect the growth in real estate loans.

Simultaneously, the bank has also increased the interest rates for deposits above 91-day tenure by 50 bps. The revised rates would be applicable only to the new deposits mobilised by the bank. "The hike is aimed at garnering more deposits and retaining our existing customers," said Dr Khandelwal.

Another state-run bank, Bank of India (BoI) has also said that it will take a look on both deposit and lending rates next week. "The aim is to give good interest on deposits and if the rates move up, the lending rates have to be appropriately marked up," bank chairman and managing director M Balachandran. He, however, maintained that the decision would in no way affect the investment climate.