Axis Bank hikes lending rates by 5 basis points
Mumbai: In a surprise move, the third largest private sector lender Axis Bank, which has been facing earning pressure in the past quarters, on Wednesday hiked its lending rates by a marginal 0.05 percentage points.
The move to increase the marginal cost of funds based lending rate (MCLR) comes days after the nation’s largest lender State Bank of India (SBI) had lowered its rates under the older base rate system by a steep 0.30 percentage points.
“The bank has decided to increase the MCLRs by 0.05 percentage points across all tenors,” Axis Bank said in a regulatory filing late in the evening.
The hike is effective from Thursday, the bank added. The one-year MCLR, at which rate its home loans and other important products are priced, will now stand at 8.30%, the bank said. The lender, which has been witnessing mounting asset quality and bottom-line pressures for the past many quarters, however, did not give any rationale for the move.
The rate action comes amid a hardening of bond yields over the past few months, which is bound to make banks report huge mark-to-market losses, which domestic rating Icra had pegged at around Rs15,000 crore in the December quarter.
The Reserve Bank of India (RBI) has also virtually told the banks that it would not allow any special dispensation to safeguard their bottom lines. The MCLR replaced the earlier base rate system in April 2016, to better translate policy actions and cost of funding faster into the pricing of loans.
Banks calculate the rate on a pre-disclosed formula and rates are reviewed on a monthly basis. It can be noted that there have been deposit rate hikes by a few lenders in select tenors. Also, the review comes amid a virtual doubling in the credit growth to the double digit figure after a dull FY17.
At its September quarter earnings, the bank had reported a slippage in its net interest margin to 3.45%, affirmed that was in line with the guidance of a 0.20% compression given earlier.
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