State-owned Bank of Baroda and private lender Development Credit Bank Ltd (DCB) both announced a hike in their benchmark lending rates by 50 basis points today.
Bank of Baroda (BoB) has increased its base rate to 8.5 per cent from 8 per cent with immediate effect, which will make loans from the bank costlier.
Meanwhile, Development Credit Bank (DCB) also raised its benchmark lending rate from 7.75 per cent to 8.25 per cent with effect from today.
"Bank of Baroda has informed BSE that the bank has decided to increase its base rate from 8 per cent to 8.5 per cent with effect from October 5," BoB said in a filing to the Bombay Stock Exchange.
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.
"Deposit rates and consequently cost of funds have increased, especially in the shorter tenor, necessitating an increase in the base rate," DCB Managing Director and CEO Murali M Natrajan said in another filing to the BSE, adding that bank has revised its base rate to 8.25 per cent from 7.75 per cent.
In order to bring in more transparency, the base rate was introduced as replacement for the Benchmark Prime Lending Rate (BPLR) from July 1 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 September 30, 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 October 1.
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.