Banks raise repo-linked loan rates and offer more on deposits


MUMBAI: ICICI Bank and Bank of Baroda notified the increase in lending rates by 40 basis points (100 basis points = 1 percentage point) following a similar increase in policy rates by the Reserve Bank of India (RBI) Wednesday.
Kotak Mahindra Bank has raised its fixed deposit rates on several maturities for retail customers. The biggest increase was for 23-month deposits where rates were increased by 35 basis points, from 5.25% to 5.6%. The bank also raised yields on its 390-day deposits by 30 basis points, from 5.2% to 5.5%. The new deposit rates take effect from May 6.
ICICI Bank said on its website that its external benchmark lending rate, which is linked to the RBI’s repo rate, is raised to 8.10%. The Bank of Baroda also notified the revision of its ‘Baroda repo-linked lending rate’ (BRLLR) by 40 basis points with effect from Thursday. For retail loans, the BRLLR is 6.9% after taking into account a 2.5% spread on the repo rate. The state-owned Central Bank of India also revised the RBLR by 40 basis points effective May 6. The Central Bank of India’s revised RBLR will be 7.25% plus Credit Risk Premium (CRP), up from the existing rate of 6.85% plus CRP. , the lender said.
Speaking to ET Now, SBI Chairman Dinesh Khara said his analysis indicated that the interest rate review would be positive for the bank as 70% of its loan book is floating. He said the bank would review its deposit and lending rates at its next ALM committee meeting.
The announcement of the revision of the floating rates is a formality because the regulation requires that these evolve in parallel with the changes of the reference index. For home and other retail loans as well as small business loans, the benchmark is primarily the RBI repo rate. About 40% of all bank loans are linked to the repo rate.
While borrowing costs for existing customers will immediately increase, lenders have the option of keeping rates low for new borrowers by revising spreads.

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