Five public sector banks on Monday raised their base rate - the minimum lending rate beyond which they can not lend - by 50 basis points, making home and auto loans expensive for their customers.
IDBI Bank, Indian Bank, Indian Overseas Bank, Allahabad Bank and Dena Bank all raised their base rate, after which most of the banks' base rate have gone up to 9 per cent. Dena Bank base rate is at 8.25 per cent.
The base rate was introduced as replacement to the benchmark prime lending rate (BPLR) from July this year to bring in more transparency in bank lending.
This is the second revision since the introduction of base rate. Under Reserve Bank of India guidelines, banks have to review their base rate every quarter.
Also, for existing borrowers who have taken loans on BPLR system, the EMI payment would be higher, since BPLR has been increased by many banks.
Kolkata-based Allahabad Bank has raised BPLR by 75 basis points to 13.25 per cent, while Chennai based Indian Bank raised it by 25 basis points to 13.25 per cent.
To ease the impact of high lending rates, some of the banks have also raised their deposit rates.
For example, IDBI Bank has increased fixed deposits rates of different maturities by 25 to 100 basis points. IDBI Bank offers the highest rate of 8.75 per cent on deposits of 1,100 days' tenor, compared to 8.25 per cent interest at present.
The bank announced an increase of 100 basis points on the interest rate for short-term deposits with a 46-90 day maturity period. This means depositors of IDBI Bank will now earn 5.50 per cent interest on these short-term deposits, as compared to 4.50 per cent interest previously.
Dena Bank has also raised the deposit rates by up to 150 basis points or 1.5 per cent. Deposits for a maturity of 121-179-days will now carry an interest rate of 7 per cent per annum as against the earlier 5.50 per cent, an increase of 150 basis points, it said in a statement.
Term Deposits of Dena Bank having maturities of 180-270-days and 271-364-days will carry an uniform interest rate of 7.50 per cent as against the earlier 6.25 per cent and 6.50 per cent in the respective maturities.
Besides these two, private sector lender Federal Bank has also increased its fixed deposit rates.
Revised rates of interest for term deposits for 181 days to less than one year is 8.25 per cent. The rate is 8.60 per cent for deposits for a period of 1 year to less than 3 years and it is 8.75 per cent for a period of 3 years and above, a bank press release said.
Senior Citizens are eligible for additional interest of 0.50 per cent. The new rates are effective from Tuesday.
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