HDFC Bank to hike lending rate by 20 bps

HDFC Bank has become the first bank post policy to raise its lending rate by 20 basis points (bps) to 10 per cent, a move other banks are likely to follow soon.

The base rate (minimum interest rate on loans) of the second largest private sector bank is now at 10 per cent with effect from November 2, 2013, the bank’s Web site said.

The increase in base rate by banks will push up the equated monthly instalments (EMIs) of borrowers.

The bank had last raised its base rate by 20 bps in August to 9.8 per cent. A basis point is one hundredth of a percentage point.

The upward revision in the base rate comes after RBI hiked the key policy rate (repo rate) by 25 bps to 7.75 per cent in its second quarter monetary policy review on October 29.

The hike in repo rate increases banks’ cost of borrowing from RBI, thereby impacting their net interest margins. Repo rate is the rate at which banks borrow short-term funds from RBI.

HDFC Bank’s benchmark prime lending rate (BPLR) also increased to 18.5 per cent per annum from November 2.

beena.parmar@thehindu.co.in

Source: thehindubusinessline