Bank of India hikes PLR by 50 bps

Bank of India (BoI) has spared agriculture and small and medium enterprises from a sharp hike in the prime lending rate.

The public sector bank has raised its PLR by 50 basis points to 12 per cent, but for farm and SMEs, the increase is only 25 basis points.

The industry wide increase in cost of funds and the Reserve Bank of India's decision to revise the Cash Reserve Ratio (CRR) in December 2006 have influenced the decision to revise lending rate, a senior BoI official said.

Banks have raised PLR by 125 basis points (bps) in three stages - first in April (50 bps), second in August (25 bps) and January 2007. They also revised interest rates on domestic term deposits twice by 150 basis points this financial year, he said.

Asked about small hike in lending rate for farm and SMEs, he said, "We did not pass on the maximum hike (in costs) as the farm sector does not have a similar capacity to absorb cost increase compared with corporates and other segments."

Further, agriculture is a national priority and crop loans up to Rs 3 lakh will not be impacted by increase in PLR and will continue to be charged an interest of 7 per cent. The SME sector already provides better margins, the official said.

The Mumbai-based bank's agriculture portfolio stood at Rs 10,000 crore by end of November and has grown by 12 per cent on annualised basis.

SME portfolio has grown by 20 per cent to Rs 18,000 crore.