Kick-starting a rate hike in the wake of the Reserve Bank of India?s (RBI) decision to up CRR and repo rates by 50 basis points each, State Bank of India (SBI) and Union Bank of India have decided to raise their benchmark prime lending rates (BPLR). The increase in prime lending rates would expectedly increase the borrowing cost for people.
While SBI has raised rates to 12.75%, Union Bank revised its BPLR to 13.25%, effective from July 1. SBI?s fresh rates will come into effect on Friday.
Speaking to FE, a senior SBI official said, ?We had reduced our BPLR by 50 basis points earlier this year and hence we have only restored our interest rates by increasing the same by a similar degree.”
Union Bank of India has also hiked the interest rates on term deposits between 25 basis points and 1% across different maturities. The bank had reduced its BPLR by 50 basis points to 12.75% on February 21. It has restored its BPLR to the earlier level of 13.25%, a bank release said.
Punjab National Bank is likely to revise its BPLR on Friday, whereas the other banks like Bank of India and Bank of Maharashtra may follow suit on June 30. Another public sector lender, Canara Bank, said it would deliberate on a rate revision soon.
Banks should consider whether they can absorb the impact of the CRR and repo hikes instead of passing on the burden to their customers, Canara Bank chairman and managing director MBN Rao said, adding that the bank?s liquidity position was comfortable. ?A 0.5% hike in the repo need not necessarily translate into a 0.5% hike in lending rates,” he said.
Rao, who is also the chairman of Indian Banks Association, said the apex bank?s decision would help ease inflation. SBI?s announcement came after a host of lenders such as HDFC Bank, Jammu & Kashmir Bank and Yes Bank hiked their BPLRs in the range of 0.25% to 1% to protect their margins.