Three banks on Wednesday hiked their prime lending rate in response to RBI’s 50 basis-point hike in the repo rate and 25 basis-point hike in the cash reserve ratio
MUMBAI: Banks have begun to feel the heat within a day of the central bank’s rate hikes.
Three banks on Wednesday hiked their prime lending rate in response to RBI’s 50 basis-point hike in the repo rate and 25 basis-point hike in the cash reserve ratio. Repo rate is the rate at which the RBI lends overnight to banks and CRR is the proportion of their deposits that banks have to set aside with the RBI.
Punjab National Bank hiked its PLR by 100 basis points to 14% and deposit rates by 75 to 100 basis points. The hikes would take effect from August 1. A basis point is equal to 0.01%. The bank’s chairman and managing director, K C Chakrabarty, told reporters in New Delhi that the hike in PLR was necessary after the RBI action to protect margins. He added that the rise in home loan rates would be moderate.
Axis Bank became the first private bank to hike its PLR from 15.25% to 15.75%, with immediate effect. The bank could be reached for comment.
Jammu& Kashmir Bank too upped its PLR by 50 bps to 14.5%, also effective from August 1.
J&K was one of the first banks to hike its PLR after the previous repo rate hike. The
bank’s CMD, Haseeb Drabu told DNA Money that RBI’s rate hikes were unexpected because the previous hikes were yet to take effect and that they were pre-emptive. “After the hikes, there was no other way but to hike our PLR,” he added. He also said that the hike would be most felt in the SME and retail segments, but added that home loans will not be impacted much.
Asked whether his bank was looking at increasing deposit rates too, Drabu said, “The PLR hike has been done to give us the headroom to hike deposit rates.”
Vijaya Bank CMD Prakash P Mallya said his bank’s asset and liability committee would meet in a day or two to decide on the issue. T Y Prabhu, executive director, Union Bank of India, also said his bank would wait for the Alco to meet to take a call on the matter.
g_seetharaman@dnaindia.net 
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