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Thursday, May 5, 2011

Lenders begin to hike rates; PNB, YES Bank raise base rate & PLR by 50 bps

MUMBAI: Taking a cue from the Reserve Bank of India, commercial banks and housing finance companies have started raising lending rates. Just a day after the central bank raised key policy rates and the savings bank account rate , Punjab National Bank and YES Bank increased lending rates for existing and new customers while LIC Housing Finance hiked rates for new customers.

PNB and YES Bank raised their base rate and prime lending rate by 50 basis points. One basis point is 0.01 percentage point. With the latest rate revision, PNB's base rate would stand at 10% while that of Yes Bank's would be at 9.50%. The prime lending rate of PNB and YES Bank stands at 13.5% and 19%, respectively. LIC Housing Finance increased the fixed rate of interest for new customers. It has also introduced a floating rate loan scheme and has also linked the fixed rate of interest to borrowers to their prime lending rate.

LIC Housing finance CEO VK Sharma said the company has not revised rates since they were last revised in April and the next review is due in June. "The floating and fixed rates of LIC Housing Finance are now linked to its PLR which was not the case earlier," he added. Under the new scheme, a borrower can avail of floating rate at 9.90% for a loan up to Rs 30 lakh while it is 10.15% for a loan amount between . 30 lakh and . 75 lakh and 10.30% for loans above . 75 lakh.

The housing finance company also offered a fixed rate loan for the first five years with a one-time option to move to the floating rate system. The fixed rate is pegged at 10.50% for loans up to Rs 30 lakh, 10.75% for loans between Rs 30 lakh and Rs 75 lakh and 11% for loan above . 75 lakh. Reacting to the RBI policy on Tuesday, CEOs of large commercial banks such as ICICI Bank and HDFC Bank had said they expected lending rates to increase by 50 to 100 basis points. SBI chairman Pratip Chaudhari, however, felt that rates would move up by 25 bps.

Most banks' base rate is around 9.50% and the PLR is in the range of 13.50-13 .75%. Indian Overseas Bank chairman and managing director M Narendra also said the asset liability committee of the bank will be meeting on Thursday to review interest rates. He expects lending rates to go up by 50 basis points in the near future. Bank of Maharashtra also revised its base rates by 50 basis points while raising it prime lending rate by 75 basis points to 14.25%.

Source: EconomicTimes


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