All the major banks in India – ICICI Bank, HDFC Bank, SBI, BoB and PNB, to name a few – have increased the interest rates offered to fixed deposit customers. The banks have also hiked the interest rates that they charge on various loans, like home loans, personal loans and auto / car loans.
| With inflation being at multi-year highs, and remaining over 11% for consecutive weeks, the Reserve Bank of India (RBI) had increased the reverse repo rate and the cash reserve ratio (CRR) last week. (To know more about interest rate hikes in August 2008, please read “Once again, banks hike interest rates for deposits and lending (loans)“) |
Reverse repo is the rate at which the RBI lends money to the banks, and CRR is the amount of cash that banks have to deposit with the RBI. A high CRR means that more money can’t be lent out for commercial purposes.
(Looking for interest rates offered to NRIs by these banks? Please read “Banks increase interest rate on deposits for Non Resident Indians (NRIs)“).
Both these measures have an effect of increasing the cost of funds for banks. And therefore, as a reaction, most Indian banks have increased their lending and deposit rates.
This is very good news for people wanting to park their money in fixed (or term) deposits. At the same time, it is bad news for people wanting to borrow money through various loans like home loans and car loans.
Here are the details of the rate hikes:
ICICI Bank
ICICI bank has increased it benchmark advance rate (BAR) by 0.75% to 16.5%. The floating reference rate (FRR) for consumer loans has also been increased by 0.75% to 13.5%.
ICICI bank has also hiked the interest rate offered on fixed deposits by 0.5% to 1%, for deposits less then Rs. 15 Lakhs.
HDFC Bank
HDFC Bank has raised its prime lending rate (PLR) by 0.75%. The new PLR stands at 16%.
HDFC Bank has also increased its fixed deposit rates by 0.5% to 1%, depending on the tenure of the deposit.
HDFC (Home Loans)
HDFC has upped its retail prime lending rate (RPLR) by 0.5%. It has increased the adjustable or floating rate of interest for home loans for new borrowers to 11%. The fixed rate has been increased to 14%.
State Bank of India (SBI)
SBI has increased its prime lending rate (PLR) by 0.5% to 12.75%.
A decision of hiking the interest rate for home loans and fixed deposits is pending.
Punjab National bank (PNB)
PNB has increased its rate to 13%.
Axis Bank
Axis bank has increased its PLR by 0.5% to 15.25%.
IDBI Bank
IDBI Bank has raised its lending rate by 0.5%. The new lending rate is 13.75%.
IDBI Bank has also increased its fixed deposit rates by 0.25% to 0.75%
Bank of India (BoI)
Bank of India has increased its PLR by 0.5% to 13.25%.
Bank of India has increased its term deposit rates by 0.25% to 1% depending on the tenure of the fixed deposit.
Canara Bank
Canara bank has increased its rate to 13.25%.
Union Bank
Union bank has increased its rate to 13.25%.
Dena Bank
Dena bank has increased its PLR by 0.5% to 13.5%.
It has also increased the interest rate on term deposits by 0.25% to 0.75% for maturities more than 180 days. The interest rate for fixed deposits with tenure of over two years is now 9%.
Vijaya Bank
Vijaya bank has increased its PLR by 0.5% to 13.25%.
It has increased the interest rate by 0.5% for term deposits with tenure between 180 and 364 days, and the rate stands at 8%. The interest rate by 0.2% for term deposits with tenure between 1 year and 2, and the new rate is 9%.
Allahabad Bank
Allahabad Bank has upped its benchmark prime lending rate (BPLR) by 0.5% to 13.5%.
It has also increased the interest rates on fixed deposits by upto 0.5% depending on the maturity of the deposit.
Andhra Bank
Andhra Bank has raised its PLR by 0.5% to 13.25%.
Bank of Maharashtra (BoM)
Bank of Maharashtra has increased its fixed deposit rates by 0.25% for some tenures.
Indian Overseas Bank (IOB)
Indian Overseas Bank has raised its benchmark prime lending rate (BPLR) by 0.25%, but only for new loans.
Non Banking Financial Institutions (NBFCs)
Apart from the banks, many NBFCs have also increased their rates by 1% to 2%.
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