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| PNB signals rise in lending rates |
| BS Reporter / New Delhi Jul 31, 2010, 01:30 IST |
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In an indication that lending rates are set to go up, Punjab National Bank (PNB) today increased its benchmark prime lending rate (BPLR) by 75 basis points to 11.75 per cent. The bank, however, did not change its base rate.
The move will affect all borrowers who had availed loans from PNB before the base rate regime came into force at the start of the month. Those who availed floating rate loans or those whose interest rates would come up for reset in the coming months will have to pay higher rates, linked to BPLR.
While introducing the base rate, the Reserve Bank of India had mandated that the interest rates on existing loans would only be reset, if the lender and borrower were willing to shift to the new regime.
PNB had fixed its base rate at eight per cent.
The move may be seen as an attempt to encourage people shift to the new base rate system. The impact of the increase in policy rates might be seen in the base rate next quarter, said a banker.
“The current increase in BPLR would not adversely impact customers’ interest, as the new customers will come under base rate regime. The existing borrowers also have an option of switching over to the base rate whenever they so desire. Hence, the impact of increased BPLR on the borrowers is expected to be minimal,” the bank said in a statement.
The Delhi-based bank also announced an increase of up to 75 basis points in its term deposit rates for various maturities. The increased rates are applicable for deposits up to Rs 10 crore. The increase in both lending and deposit rates will come into effect from August 1, 2010.
“The bank is offering highest interest rate at 7.50 per cent per annum for deposits of five years and above. The step has been taken to compensate its depositors against the inflation impact,” it said.
It said the BPLR had been increased to offset the impact of changes in deposit rates.
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