The RBI’s hawkish policy stance on loans in the country has forced lenders to hike interest rates for existing borrowers of home loan, education loan and vehicle loans by up to 75 basis points. While SBI is the only major bank in the country to refrain from hiking its Benchmark Prime Lending Rate (BPLR), Punjab National Bank raised its BPLR by 75 basis points to 11.75%, while IDBI and Union Bank increased their basis points by 50 to 13.25% and 12.25.
Mr. K.R. Kamath, Chairman and Managing Director of Punjab National Bank explained that this increase in interest rates of existing borrowers would only raise the cost of loans. He however added that existing borrowers were also offered the choice to switch to their base rate, below which banks could not lend. He said, “The borrowers linked to BPLR will see a hike in interest rates and home, auto and education loans will get costlier”.
The Bank of Baroda, Oriental Bank of Commerce and Corporation Bank also hiked interest rates by 50 basis points to 12.5%. The RBI, in its monetary review raised the short-term borrowing (reverse repo) rate by 50 basis points and lending (repo) rate by 25 basis points. It has also maintained its cash reserve ratio unchanged due to the difficult liquidity positions in the market. Also, a further BPLR hike could be expected if the RBI policy measures state so.