Bank of India hikes lending rate to 13.25%

Bank of India hikes lending rate to 13.25%

Mumbai: Mumbai-based public sector lender Bank of India raised its lending rates following a similar move by Punjab National Bank.

The bank said it is hiking its base rate to 9% from 8.5% earlier and its prime lending rate to 13.25% from 12.50% earlier. Base rate is the rate below no bank can lend to its customer while prime-lending rate (PLR) is supposed to be the reserve of a bank’s best customer. In practice banks were indulging in sub-PLR lending which necessitated the Reserve Bank of India to introduce base rate that will eventually replace PLR.

However, some old customers of banks are still in the PLR system, for example housing loan borrowers and a change in PLR means hike in their EMIs.

Bank of India’s move was expected as all banks have hiked their deposit rates in recent times and commensurate to that, they have hiked their PLRs too. However, most of the banks have not touched their base rate yet, but it is fair to assume that other banks will hike their base rate this week, especially after the mid-quarter RBI policy scheduled on 16 December.