Auto, home loans to go up as 5 more banks increase base rates

Auto, home loans to go up as 5 more banks increase base rates

Auto and home loans will be costlier this festive season as five more lenders including big players like ICICI, HDFC and Bank of Baroda on Tuesday raised their base rates-below which they can't lend by up to 50 basis points.

Country's largest private sector lender ICICI Bank said it would up its base rate by 25 basis points (0.25 per cent) to 7.75 per cent from Wednesday, a move that would make home, auto and corporate loans costlier.

A similar hike of 0.25 per cent was made by the second largest private sector lender HDFC Bank, which revised its base rate to 7.50 per cent.

Last week, six banks including PNB, IDBI Bank and Allahabad Bank had hiked their base rates by up to 50 basis points (0.5 per cent).

Another private player, Development Credit Bank (DCB) also raised its benchmark lending rate from 7.75 per cent to 8.25 per cent with effect from today.

Two state-owned lenders, Bank of Baroda (BoB) and Andhra Bank also jumped the bandwagon by increasing their base rates by 25 and 50 basis points respectively.

While BoB has increased its base rate to 8.5 per cent from 8 per cent with immediate effect, Andhra Bank revised its benchmark lending rate to 8.50 per cent from 8.25 per cent.

However, another public sector lender Dena Bank said it will continue its base rate of 8.25 per cent for the present.

The base rate is the benchmark rate below which banks are not allowed to fix their lending rates.

The revision in base rates follows the RBI's move to raise short-term lending (repo) and borrowing (reverse repo) rates in its September monetary review in order to tame inflation by curbing consumer spending.

In order to bring in more transparency, the base rate was introduced as replacement for the Benchmark Prime Lending Rate (BPLR) from 1st July this year.

In the last few days, a number of banks have resorted to an upward revision of their base rates and interest rates.

On 30th September, a number of lenders raised their base rates.

Punjab National Bank hiked the minimum rate of interest on loans to 8.5 per cent from 8 per cent, while Axis Bank, Kotak Mahindra Bank and foreign lender Standard Chartered Bank raised their base rates by up to 25 basis points.

The following day, two state-owned lenders-Indian Bank and Indian Overseas Bank raised their minimum benchmark lending rates by up to 50 basis points.

While Chennai-based Indian Bank raised its base rate by 50 basis points to 8.5 per cent, Indian Overseas Bank hiked it by 25 basis points to 8.5 per cent effective 1st October.

Private sector lender Karur Vysya Bank also increased its base rate by 50 basis points to 9 per cent.

As per RBI guidelines, banks have to review their base rates every quarter.

This is the first review of the rates since it was introduced in July this year.