ICICI Bank raises base rate by 25 bps

India’s largest private sector lender, ICICI Bank, on Friday said it had raised its base rate, or the minimum lending rate, by 25 basis points (bps) to 9.5 per cent with effect from Monday.

With this, it became the first private bank to raise the base rate after the Reserve Bank of India (RBI) increased its key policy rates on June 16.

ICICI Bank also raised its prime lending and floating reference rates by 25 bps each. The revised prime lending rate will be 18.25 per cent and the floating reference rate 15.25 per cent.

The increase will make new advances, including consumer loans, more expensive. Interest costs for customers who have borrowed money from the bank at floating rates will also go up.

RATE CARD
Bank	Base rate (in %)
State Bank of India	9.25
HDFC Bank	9.25
Axis Bank	9.50
ICICI Bank	9.5*
Union Bank of India	10.00
Punjab National Bank	10.00
Bank of India	10.00
Central Bank of India	10.00
Bank of Baroda	10.00
Dena Bank	10.20#
Canara Bank	10.25
Indian Overseas Bank	10.25
Vijaya Bank	10.25#
Corporation Bank	10.25
*effective from July 4, 2011 #effective from July 2, 2011                                                          Source: Banks

Indian banks’ lending rates have hardened in recent times as the cost of funds became dearer after RBI raised key policy rates as many as 10 times in the past 15 months to tame rising inflation.

According to bankers, deposit rates have shot up faster than lending rates during this period. They expect lending rates to rise even if deposit rates remain steady.

“Since April 2010, the repo rate has gone up by 225 bps, while the reverse repo rate has gone up by 275 bps. But base rates of banks have not increased by a similar amount. Deposit rates even went above 10 per cent. Lending rates have lagged and that will catch up now, otherwise margins will shrink,” said a chief executive of a private sector bank.

ICICI Bank has kept its deposit rates unchanged since May 19. Top private banks like HDFC Bank and Axis Bank have not raised their lending rates. Since introduction of the base rate last July, ICICI Bank has raised it by 175 bps.