A recent press report said that Union Bank of India has hiked its minimum lending rate, by 50 basis points to 10 per cent. The bank said that it has revised its base Rate by 50 basis points from 9.5 per cent to 10 per cent due to the increasing interest rate scenario and higher Benchmark Policy Rates of RBI as well as increasing cost of deposits.
The revised rate shave also lead to the increase in the Benchmark Prime Lending Rate (BPLR) from 13.75 per cent to 14.25 per cent, the Base Rate system has replaced the BPLR system with effect from the month of July 2011. The Benchmark Prime Lending Rate is applicable for old customers who have taken loans earlier.
The higher lending rates would make loans dearer for both new and existing auto Loan, Home Loan and corporate loan borrowers. The bank has now moved closer on the heels of a similar decision by various lenders like YES bank, Indian Bank, Punjab National Bank etc.
The RBI has hiked the short-term lending (repo) rate to 25 per cent and borrowing (reverse repo) to 6.25 per cent, ie. by 50 basis points in its Annual Credit Policy review.