Private sector lender ING Vysya Bank on Tuesday upped both its base and benchmark prime lending rates (BPLR) by 25 basis points to 9.7% and 18.25% respectively. ING Vysya is among the first to raise interest rates after the Reserve Bank of India (RBI) hiked the repo rate by 25 basis points to 7.5% last Thursday. More banks are likely to follow suit in the next few days and increase their loan rates by a similar quantum.
Shailendra Bhandari, MD and CEO, ING Vysya Bank, said, ?We are not normally not the first off the block, but the RBI is keen on quick monetary transmission.? Bhandari believes that interest rates could go up by another 50 basis points over the course of the year and feels that customers could begin to resist the higher rates.
None of the bigger banks have yet upped their loan rates after the RBI move though most have indicated that the higher cost of funds will be passed on to the borrowers. ?This measure (rate increase) and the prevailing systemic liquidity conditions could lead to an increase in funding costs for banks and in lending rates,? ICICI Bank?s MD and CEO Chanda Kochhar said after the repo rate hike.
Canara Bank, IOB and Corporation Bank have decided to hike interest rates in the coming week. S Raman, CMD, Canara Bank, said, ?Our bank may increase its base rate by 25 basis points this week.? Ramnath Pradeep, CMD, Corporation Bank, said that the bank would increase its lending rates to protect margins though it may not increase deposit rates. M Narendra, CMD, Indian Overseas Bank, too, hinted at a 25 basis point increase in rates at its ALCO meeting. On Saturday, IDBI Bank?s ALCO decided to keep its base rate and BPLR unchanged at 10% and 14.5% respectively.