Major lenders, including State Bank of India (SBI), ICICI Bank and HDFC Bank, on Friday raised their lending and deposit rates by up to one percentage point.
While the hike in lending rate would make auto, home and commercial loans expensive, increase in deposit rates will ensure better returns for depositors.
In line with market trend, SBI announced increase in its base rate or the minimum lending rate by 40 basis points to 8 per cent.
The fixed deposits with SBI would fetch high interest. The bank would give highest return of 9 per cent for deposits of 555 days and 1,000 days, up from 8.5 per cent.
The highest increase of 1 percentage point was in fixed deposits with maturity between 7-14 days. The short-term FDs would fetch an interest rate of 4 per cent from the existing 3 per cent.
SBI also raised the benchmark prime lending rate by 25 basis points to 12.75 per cent. This will make EMIs for the existing loan dearer by at least 25 basis points. The new rates, SBI in a statement said, would be effective from January 3.
Meanwhile, HDFC Bank decided to increase its base rate by 25 basis points to 7.75 per cent.
Besides ICICI, private sector lenders Kotak Mahindra Bank and Dhanlaxmi Bank also increased base rates by up to 75 basis points.
ICICI Bank announced an increase of 0.5 per cent in the Base Rate with effect from January 3, 2011. The revised rate will be 8.25 per cent as against 7.75 per cent at present, the bank said in a statement.
The base rate is the lowest rate below which banks cannot offer loans. In order to bring in more transparency, the base rate was introduced as a replacement for the Benchmark Prime Lending Rate (BPLR) from July 1, 2010.
ICICI Bank has also announced an increase of 0.25 per cent in its benchmark prime-lending rate (BPLR) and in its Floating Reference Rate (FRR) for consumer loans (including home loans) with effect from January 3, 2011.
The BPLR is used for determining interest rates on loans and advances sanctioned up to June 30, 2010.
ICICI said the fixed rate customers will not be impacted by the above increase and their contracted rates will remain unchanged.
Mumbai-based Kotak Mahindra Bank hiked base rate and BPLR by 0.25 per cent each. With the increase base rate would go up to 8.25 per cent.
Dhanlaxmi Bank also announced an increase of 0.75 per cent in its base rate and Benchmark Prime Lending Rate (BPLR). Base rate will be revised to 8.25 per cent from the current 7.50 per cent while BPLR will be changed to 17.25 per cent effective, January 1, 2011.
Many banks, including Union Bank, Punjab National Bank, Bank of India, IDBI Bank, Indian Bank, Indian Overseas Bank, Allahabad Bank, Dena Bank and Standard Chartered Bank have hiked their base rates in the recent past.
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