The country’s second largest lender ICICI Bank hiked lending rates on Wednesday, upping the base rate by 50 basis points 8.75% and its benchmark prime lending rate (BPLR) to 17.5%, the highest in the industry. Another large private sector lender, HDFC Bank also upped its base rate by 45 basis points to 8.20% though the BPLR remains unchanged at 16.25%. ?The rate hike is in line with deposit rate increases in the last couple of months,? says Paresh Sukthankar, executive director, HDFC Bank, adding that credit growth rates have remained largely stable so far. Industry watchers believe, however, that by March credit growth for the banking system as a whole could taper off to 21-22% from current levels of 23-24%.
The bank has also upped interest rates offered on deposits in the range of 25 to 50 basis point. The latest round of rate hikes, comes after the Reserve Bank of India(RBI) hiked its key policy rates on January 25, 2011. In early February, State Bank of India had hiked its base rate and BPLR by 40 basis point and 25 basis point, respectively. The rate hike cycle was kicked off by Punjab National Bank on January 31. Close on its heels, home loan major HDFC upped interest rates on floating rate home loans by 25 basis points making loans costlier for both existing and new borrowers.
Since then more than half a dozen banks have made money more expensive, including Bank of India, Union Bank, Oriental Bank of Commerce, Indian Overseas Bank, Dena Bank, Allahabad Bank and United Bank. Many others like Kotak Mahindra Bank have also raised rates on deposits.
?Interest rates could inch by about 50 to 100 basis point in the financial year. This will have an impact on credit offtake. Banks are also slowing down their disbursments after the RBI expressed its concern on the rapid growth in credit,? said the CEO of a private sector bank.
