A recent press report said that state-owned Indian Overseas Bank has raised itsed its base rate by 50 basis points to 10 per cent, within days of the Reserve Bank announcing an increase in its short-term lending and bank savings rates to tackle inflation.The bank has increased its Benchmark Prime Lending Rate (BPLR) rates to 14.25 per cent from 13.75 per cent. The Base Rate system has replaced the BPLR system with effect from July 1, 2010 but still BPLR is applicable to old customers who have borrowed loans earlier.
The higher lending rates will make loan very costly for both new and existing Auto Loan, Home Loans and corporate borrowers. Indian Overseas Bank’s move has come immediately after the decision by various lenders like Union Bank of India, Andhra Bank, YES Bank, Indian Bank, Punjab National Bank, Oriental Bank of Commerce, Bank of Maharashtra and IDBI Bank to affect a hike in their lending rates.
The repo rate and reverse repo rate now stand at 7.25 per cent and 6.25 per cent, respectively besides raising the savings bank deposit interest rate by 50 bps to 4 per cent. The hike in rates by the Reserve Bank of India is planned at controlling inflation.