Banks likely to increase lending rates

Banks are raising lending rates since they have witnessed a rise in their non-performing assets

August 08, 2013 4:00 IST | India Infoline News Service
After the Reserve Bank of India (RBI) squeezed liquidity and raised short-term rates on July 15, banks have been forced to raise deposit rates to attract retail money. Many of banks have increased rates to attract retail depositors.

Yes Bank raised its base lending rate by 25 basis points to 10.75% and fixed deposit rates by 25-50 basis points, effective August 1. A basis point is one-hundredth of a percentage point.

Axis Bank raised deposit rates by up to 400 basis points for select maturities. Smaller banks such as Development Credit Bank and Ratnakar Bank have also raised deposit rates.

On the other hand, banks are raising lending rates since they have witnessed a rise in their non-performing assets (NPAs) or bad loans.

HDFC provides home loans in the range of 10.15% to 10.40% and if liquidity conditions continue to be tight, it may be forced to raise rates for its borrowers, according to a media report.

HDFC's subsidiary HDFC Bank has raised the base lending rate by 20 basis points to 9.80%, the report added.

Combined with lending rate increase for cars, the fuel prices also going up every fortnight. Soon car buyers will decrease. Prices are galloping beyond reach of middle and lower middle income class who form the major population of our country.

Everyone is keenly waiting for the next mid quarter review and see how RBI chief Raghuram G Rajan deals with the crisis which includes economic slowdown, weakening rupee and inflation.

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