Banks raise deposit and base rates
A few public and private banks have raised their base rates to accommodate the increasing borrowing costs
. Though the liquidity situation with the banks is comfortable at this point in time, it might not remain the same going ahead, considering some top banks have also raised deposit rates to garner liquidity.
Deposit rates hiked
Top banks have raised deposit rates across various maturities to attract customer. State Bank of India (SBI) has hiked interest rates on domestic term deposits by 25-75 basis points across various maturity buckets. (100 bps equals 1 percent). PNB and IDBI Bank have upped term deposit rates by 25-50 basis points and 15-50 basis points, respectively, across various maturities. The banks are scrambling to raise resources as they anticipate further increase in borrowing cost going ahead. In the wake of spiraling inflation, bank deposits have lost their significance as the real return after the hikes still remains negative. Hence over the next few months, banks will have to do their best to mop up resources.
Base rates hiked
The new benchmarking of loans through - base rate, which replaced BPLR in July 2010, has also been upped by some banks' so as to match the deposit rates and to have some breathing space as borrowing costs eat into their NIMs. Public sector banks like, Allahabad bank and Punjab National Bank as well as private sector banks like Kotak Mahindra and Axis Bank have raised base rates.
The reason why some banks have refrained from hiking base rate is the upcoming festive season and the demand for loans, which comes with it. On the whole banks have remained somewhat patient' this time around in hiking rates, but once the festive season is over the situation might not remain the same.
Banks raise deposit and base rates
By: Anjali Shukla
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