MUMBAI: Commercial banks on Thursday started increasing their lending and deposit rates a day after the RBI raised the repo rate — the rate at which it lends to banks. While ICICI Bank, Bank of Baroda and DCB Bank were among the first to raise repo-linked lending rates, Kotak Mahindra Bank raised the deposit rates by 30-35 basis points.
This will make home, auto and SME loans costlier by 40 basis points (0.4 percentage point) as banks pass on their increased costs of funds to fresh and existing borrowers.ICICI Bank said that its external benchmark lending rate or IEBLR is referenced to the RBI Policy Repo Rate with a mark-up over the rate at 8.10% effective May 4.
Bank of Baroda on Thursday raised retail loans linked with Baroda Linked Lending Rate to 6.9%, which is at a 250-basis point mark-up over the repo rate. DCB Bank also hiked its EBLR from 8.44% to 8.84% and EBLR for home loan to 8.56%, up by 40 bps.
The RBI on Wednesday raised the repo rate by 40 bps to 4.4% to contain inflationary pressures. The rate hike comes amid expectations of consumer price index inflation having possibly risen to 7.5% in April from 7% in the preceding month, way above the Central bank monetary policy committee’s upper tolerance limit of 6%.
Many retail and SME loans are linked to external benchmarks like the repo rate and the 3- and 6-month G-secs. Last month lenders, including SBI, BoB, Kotak Bank and Axis Bank raised the marginal cost of fund-based lending rate (MCLR) by 5-10 basis points.
Kotak Mahindra Bank raises FD interest rates
Kotak Mahindra Bank on Thursday announced it will increase interest rates on fixed deposits below Rs 2 crore by 30-35 basis points from Friday