Top foreign lenders in India have started raising their lending rates aggressively in the wake of the rising cost of funds.
Standard Chartered Bank, the largest foreign bank in the country with 95 branches, raised its base rate by 25 basis points to 9.75 per cent with effect from September 1. This is the second time the bank raised its minimum lending rate since August. Deutsche Bank increased its base rate by 25 basis points to 9.75 per cent. The rate increase is effective from September 2. DBS Bank also raised its minimum lending rate by 25 basis points to nine per cent from the beginning of this month.
“The rise in base rates clearly reflects cost of funds have become expensive. The lending rates are likely to rise further if the Reserve Bank of India (RBI) decides to raise policy rates later this month,” said a senior official in charge of retail assets in a Mumbai-based foreign bank.
| GOING UPHILL | |
| BASE RATE OF BANKS | (IN%) |
| SBI | 10 |
| ICICI Bank | 10 |
| HDFC Bank | 10 |
| StanChart | 9.75 |
| HSBC | 9.75 |
| DBS Ban | 9 |
RBI’s mid-quarter policy review is scheduled on September 16. The central bank has raised policy rates as many as 11 times since March 2010 to tame rising inflation in the economy. A few foreign banks like Citibank and HSBC have, till now, not announced a rise in their lending rates this month. Both the banks had revised their base rates to 9.75 per cent in August.
Foreign banks had initially kept their base rate lower than their local rivals, when it was first introduced in July 2010.
Standard Chartered Bank and Citibank had fixed their base rates at 7.25 per cent, or 25 basis points lower than India’s largest lender State Bank of India, when the base rate was introduced. Deutsche Bank’s base rate was even lower at 6.75 per cent. SBI’s minimum lending rate is currently 10 per cent.