Allahabad Bank hikes benchmark prime lending rate by 50 bps

Public sector lender Allahabad Bank today hiked its prime lending rate (PLR) by up to 50 basis points to 12.50 per cent in response to the RBI's decision to raise short-term rates.

The PLR was replaced by the base rate system in July, but for existing borrowers, this remains the benchmark rate.

"The bank has decided to increase its PLR by 50 basis points to 12.50 per cent with effect from August 16," Allahabad Bank said in a filing to the Bombay Stock Exchange.

The increase in PLR was widely expected after the Reserve Bank of India increased the key short-term repo and reverse repo rates on July 27 with a view to combat high inflation.

The short-term lending (repo) rate was hiked by 0.25 per cent to 5.75 per cent, while the borrowing (reverse repo) rate was upped by 0.5 per cent to 4.5 per cent, sparking off the present round of hikes by banks.

With regard to the base rate, which is the interest rate below which banks cannot lend, Allahabad Bank has fixed it at 8 per cent.

A host of banks, including PSU lenders Punjab National Bank, Bank of Baroda, Union Bank of India, Corporation Bank and IDBI Bank, have raised their BPLRs in the last 10 days.