As the banking industry completed a year after the introduction of the benchmark lending rate or base rate, the second largest lender ICICI Bank set the ball rolling for another round of interest rate hikes by effecting a 25 bps rise in its base rate to 9.5 per cent on Friday.
The largest private sector lender also upped its retail lending rates by a similar quantum. While its new benchmark lending rate (fixed rate) will be 18.25 per cent, the floating rate will be 15.25 per cent,the city-based lender said in a release.
With effect from July 1, the new interest rates will be applicable on new loans and advances, including consumer loans and home loans, bank said, adding however, the fixed rate customers will not be impacted by these increases.
The new base rate will be effective Monday next, while the new retail lending rates will be effective today itself, the bank said.
Since the introduction of the base rate system on July 1, 2010, the rate below which a bank cannot lend to anyone, leading banks have increased their base rates on an average of 200 bps. While the largest lender SBI is yet to take a call on the new round of rate hike, it is expected to revise its rates.
SBI has increased its base rate by 150 bps since last July 1, the second largest private sector lender HDFC Bank and the third largest Axis Bank have already done so by 200 bps, while ICICI's has done so by 175
ICICI Bank is the third bank to increase base rate since June 16, after the state-run Canara Bank, which had raised its base rate to 10.25 per cent on Wednesday, and the medium-sized Dena Bank that upped its base rate to 10.20 per cent on Friday.
While the Bangalore-based Canara Bank hiked its base rate by 25 bps each to 10.25 per cent effective July 1, and the benchmark lending rate by a similar amount to 14.50 per cent attributing it to rise in the cost of funds, the Mumbai-based Dena Bank also followed suit with its base rate being hiked to 10.20 per cent and benchmark lending rate to 15.25 per cent.
Since the Reserve Bank had raised its key policy rates 25 bps at its mid-quarter policy review on June 16--the tenth increase since March 2010 during which it has upped the short-term lending and borrowing rates by a whopping 250 basis points to 7.5 and 6.5 per cent respectively, to batten down inflation--many banks have hinted at upping their base rates.
