Country's top two lenders State Bank of India (SBI) and ICICI Bank today announced a hike in lending rates by 50 basis points each, making their home, auto and corporate loans dearer.
With this hike, borrowers will have to pay higher EMIs and the tenure of their home and auto loans could also be extended.
A large number of borrowers will be impacted by the hike as both the banks together enjoy over 30% market share.
Both SBI and ICICI have increased the base rate, or the minimum lending rate, to 10% from the existing 9.50%, they said in separate statements.
SBI said its asset-liability committee, which met here today, also decided to hike rates on loans under the old BPLR (benchmark prime lending rate) system by a similar 50 basis points to 14.75%, making loans for existing borrowers dearer by at least 50 basis points.
ICICI Bank too announced an increase of 50 basis points in its benchmark prime lending rate and in its floating reference rate for consumer loans (including home loans).
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The revised rates of both lenders would be effective from August 13.
Following the Reserve Bank's decision to raise short-term key rates in its first quarter review of monetary policy last month, lenders have responded by increasing interest rates. Major lenders including SBI, Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce have raised interest rates.
In the major bank category, HDFC Bank is the only bank which have not so far raised rates following July 26 policy rate hike.
ICICI Bank said, the fixed rate customers will not be impacted by the rate hike and their contracted rates will remain unchanged.
Meanwhile, SBI increased its deposit rates in the 180-240 days basket to 7% per annum as against 6.50% earlier, the statement said.
However, interest rates on other fixed deposits have been left unchanged.
SBI has raised its lending rate by as much as 2.40% during the year. The base rate was raised to 8% from 7.40% in January this year.
The rate hike announcement came within hours of bank Chairman Pratip Chaudhuri hinting at a hike.