Mumbai: Two state-run lenders, Allahabad Bank and Punjab & Sind Bank on Monday hiked their lending rates by up to half a percentage point, becoming the first banks to up their rates after the Reserve Bank of India (RBI) increased policy rates last week.
Kolkata-based Allahabad Bank hiked its base rate by 0.5% to 9.5% and benchmark prime lending rate or BPLR by 0.25% to 13.5% respectively, from Tuesday.
Base rate is the new benchmark rate below which banks cannot lend. It replaced BPLR from 1 July.
“The hike in our interest rates is in line with the policy of our asset liability committee,” M. R. Nayak, executive director of Allahabad Bank said.
The bank has also hiked the interest rate for its 400-days deposit by 0.5% to 8.5%.
Punjab & Sind Bank said it plans to raise benchmark prime lending rate and base rate to 14.25% and 9.5%, respectively, effective 1 February.
To tame inflation, the RBI has hiked its short term lending borrowing rates (repo and reverse repo) by 0.25% on 25 January at the third quarter review of its annual monetary policy. One basis point is one hundredth of a percentage point.
This is the seventh time the central bank is increasing its policy rates this fiscal. To pass on the hike in RBI key rates, most of the banks had hiked their lending rates by around 0.5% and deposit rates by at least 1% over the past few months.