Seven lenders, including Bank of Baroda (BoB) and HDFC, today raised interest rates by up to 50 basis points, in response to the Reserve Bank's tight monetary policy announced last week.
While BoB and Oriental Bank of Commerce (OBC) raised the deposit rates, HDFC, Indian Bank, Indian Overseas Bank (IOB), Bank of India (BoI) and Dena Bank hiked their lending rates.
BoB raised it deposit rates by 50 basis points (bps) to 9.10 per cent for 444 days deposits till March 2011 and for deposit of 1 year and up to 443 days to 8.75 per cent, with effect from tomorrow.
OBC has decided to raise the fixed deposit rates by 25 basis points for deposits of varying maturities. It will pay the highest rate of 9.25 per cent for 500-day deposits.
Housing finance leader HDFC too raised its floating interest by 25 basis points with effect from today for both existing and new customers. HDFC has increased its retail prime lending rate, on which its adjustable rate home loans is benchmarked by 25 basis points.
"This is in line with the interest rates in the economy, which have hardened due to an increase in policy rates, inflation and liquidity in the domestic market," HDFC said. Indian Bank has announced an increase in base lending rates by 50 basis points to 9.5 per cent with effect from today.
Besides, IOB has also raised its base rate from 9 per cent to 9.5 per cent with effect from today. BoI raised its base rate and BPLR by 50 bps each to 9.5 per cent and 13.75 per cent, respectively with effect from February 3.
Dena Bank raised its minimum lending rate or (the Base Rate) by 0.50 per cent to 9.45 per cent with effect from February 2.
While the higher deposit rates would provide better returns to savers, rise in base rates would increase the EMIs for auto and home loan borrowers. Besides, corporate loans too would become expensive. Banks have been raising interest rates following a 25 basis point hike in short-term lending (repo) and borrowing (reverse repo) rates announced by the Reserve Bank in its third quarterly review of monetary policy last week.
The announcement of hiking deposit and lending rates follows similar announcements made by Punjab National Bank, Allahabad Bank and Punjab & Sind Bank yesterday.