Loans from HDFC Bank to go expensive very soon

The second largest private lender in the country HDFC Bank has announced to raise the lending rates soon. The announcement was made a couple of days after the Central Bank raised the repo and Reverse Repo Rates by 25 basis points.

Executive Director of the bank Mr Paresh Sukthankar said "There will be an increase in lending rate, both in retail and corporate side. Most retail products, including auto loans, will see an increase in the next few days."

After the increment the Repo Rate is 6.5 percent and the Reverse Repo Rate is 5.5 percent.
Mr Sukthankar further said "Higher ticket loans will attract higher EMIs as lending rate increase. This will lower retail demand for higher level loans."

Earlier the bank also raised the deposit rates across various maturities, effective from January 1,2011.

State Bank of Mysore raises BPLR rate by 25 points

State Bank of Mysore has announced to raise the Benchmark Prime Lending Rate of the bank by 25 basis points to 13.50 percent. The new rates will come into effect from today itself. State Bank of Mysore is subsidiary bank of State Bank of India.

The BPLR is used for determining interest rates on loans and advances sanctioned up to June 30, 2010. For the loans that were sanctioned after 30^th June , base rate is applicable.

Recently several other banks like ICICI , State Bank of Travancore , Kotak Mahindra Bank and Dhanlakshmi bank raised their BPLR rates .

Loans to go 1% more expensive this year

The Indian economy is currently expanding at the rate of 9 percent per annum but still the liquidity condition remains tight. It is expected that banks can increase their lending rates by at least 1 percent in the year 2011.

Chairman and Managing Director of Canara Bank, Mr S. Raman said, “Interest rates have not yet peaked, Rates may go up if liquidity remains tight and demand for loans increases.”

During the last year the credit growth was much faster than that of deposit rate. RBI was expecting a growth of 20 percent in the credit during the Year but it grew with 23.7 percent while the deposit showed only 14.7 percent growth.

On Friday, ICICI bank and State Bank of India raised their lending rates. Almost all the banks have raised their lending rates to 9 percent in the recent weeks.

Mr K R Kamath CMD of Punjab National Bank said “So long as there is pressure on liquidity, pressure on margins will continue,Also, there will be resistance among borrowers to absorb a hike in lending rates, but if deposits do not grow in turn with credit growth, banks will need to attract depositors by offering higher rates keeping inflation in mind.”

Inflation showed signs of rest for a few months, but it is again on a high. The food prices are increasing at record rate.

Hemant Mishra, head of global markets Standard Chartered said, “RBI is likely to continue with (its) tight liquidity stand to ensure efficient transmission of monetary policy. However, we do expect liquidity deficit level to come off to Rs 50,000-60,000 crore once demand and supply gap normalises”.