BoB raises lending rate by 75 bps

Bank of Baroda (BoB) assumed the lead among the public sector banks for raising the prime lending rate (PLR), while the country's largest bank, State Bank of India (SBI) and Union Bank of India would decide on a PLR hike next week.

BoB increased its PLR by 75 basis points on the lines of private sector banks such as ICICI Bank, HDFC Bank and UTI Bank, which raised their prime lending rates by 100 basis points earlier this week. The bank's PLR now stands at 13.25 per cent.

"This move follows the triple action taken by the RBI to raise repo rates, lower the interest on CRR balances and increase the cash reserve requirement by half a percentage point. The deposit rates have also gone very high," said A Khandelwal, chairman and managing director, BoB.

BoB has decided not to pass on the full increase in the PLR to home loan borrowers. The rates will go up by half a percentage point on housing loans for existing and new borrowers.

The bank has left the deposit rates unchanged, as these are already very high at the current levels, said Khandelwal. Net interest margins will be maintained at over 3 per cent, he added.

Union Bank of India Chairman and Managing Director, M V Nair, said "our asset-liability committee will meet next week to take a call on the lending rates."

BoB's General Manager (Treasury), D Parulekar said that even after the current round of interest rate hikes, the pressure on further hardening of rates would still remain.

Punjab National Bank chairman, S C Gupta, has also said there was pressure to raise the bank's PLR by 25-50 basis points and a decision would be taken in the next few days.