If you are planning to buy something on loan, get ready to spend more. Consumer loans, including home, personal and education loans, have become slightly costly in the past month with quite a few banks raising rates. For depositors, however, this is a good news since they would get higher returns on the money they park with a bank. Both lending and deposit rates are on the rise.
The latest to hike rates is HDFC Bank Ltd. The bank has increased its base rate, the minimum rate at which banks can lend, by 50 basis points (bps) to 8.70% per annum. The benchmark prime lending rate (BPLR), the earlier benchmark system that was replaced by base rate but still exists for some old customers, to 17.25% per annum, up from 16.50% earlier. Incidentally, this is the second time the bank has increased its base rate in less than a month. On 24 February, the bank had hiked its base rate from 8% to 8.20% per annum. Both the rates came into effect on 14 March. This rate will affect all consumer loans other than home loan.
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HDFC Bank has also increased deposit rates by 25-100 bps over various tenors. The highest interest rate on the deposits stand at 9.25% over a tenor of two years and 16 days.
Home loan rates, too, have become costlier. From 1 March, HDFC Ltd, the second largest home loan financier, increased its retail prime lending rates by 25 bps to 15.5% per annum. All floating rate loans are linked to retail prime lending rate and the increased rates are applicable to both existing and new customers.
With the latest increase in retail prime lending rates, the housing finance company has increased the same by 175 bps in the current fiscal year.
ICICI Bank Ltd, too, has increased its base rate, BPLR and floating rate by 50 bps each, effective 24 February. While the base rate of the bank now stands at 8.75% per annum, the floating reference rate and BPLR is at 14.50% and 17.50%, respectively.
It has also increased deposit rates across various maturity periods by 25-50 bps. The highest deposit rate being offered by the bank is 10% per annum for a tenor of 990 days.
Several other banks have hiked rates in the past month. With effect from 10 March, Bank of India has increased deposit rates by 25-175 bps. The highest rate offered by the bank is 9.25% per annum for deposits with a tenor of 555 days. Allahabad Bank, too, has increased deposit rates by 25-75 bps, effective 10 March. The peak rate offered by the bank is 9.25% per annum on deposits maturing in 450 days.
“Liquidity is still not comfortable in the banking system and coupled with high inflationary trend, rates—deposit as well as lending—are likely to go up by 25-50 basis points,” said S.C. Sinha, executive director, Oriental Bank of Commerce. So, expect rates to move up further.