IOB hikes minimum lending rate by 50 bps

State-owned Indian Overseas Bank (IOB) today raised its base rate by 50 basis points (bps) to 10%, within days of the Reserve Bank of India (RBI) announcing an increase in its short-term lending and bank savings rates to tackle inflation.

The revised rates will be effective from May 6, the bank said in a filing to the Bombay Stock Exchange (BSE).

Base rate is the benchmark below which the bank can not lend funds to its customers.

IOB has also increased its Benchmark Prime Lending Rate (BPLR) from 13.75% to 14.25% with effect from today.

The base rate system replaced the BPLR system with effect from July 1, 2010. However, BPLR is applicable to old customers who took loans earlier.

The higher lending rates would make loans dearer for both new and existing auto, home and corporate borrowers.

IOB's move comes close on the heels of a similar decision by various lenders like Union Bank of India, Andhra Bank, YES Bank, Indian Bank, Punjab National Bank, Oriental Bank of Commerce, Bank of Maharashtra and IDBI Bank to effect a hike in their lending rates.

The RBI hiked the short-term lending (repo) rate and borrowing (reverse repo) by 50 basis points in its Annual Credit Policy Review on May 3.

The repo rate and reverse repo rate now stand at 7.25% and 6.25%, respectively besides raising the savings bank deposit interest rate by 50 bps to 4%.

Shares of IOB closed 3.01% up at Rs 155.7 a piece on the BSE.