Banks have started hiking the lending rates following the RBI move to raise short-term lending rate (repo rate) and cash reserve ratio (CRR). Leading public sector lender Punjab National Bank decided to increase prime lending rates by one per cent to 14 per cent. While Axis Bank hiked its benchmark prime lending rate (BPLR) by 0.5 per cent to 15.75 per cent with effect from July 30, Jammu & Kashmir Bank also raised its prime lending rate by 50 basis points to 14.5 per cent with effect from Friday. Other banks are expected to follow suit in the coming days. “The board has decided to increase PLR by 100 basis points and deposit rates in between 75-100 basis points,” PNB CMD K C Chakrabarty said. The new rates would be effective from August 1.J&K Bank chairman Haseeb A Drabu said deposit rates have not been revised. "We wanted to create some headroom to improve our deposit rates," he said. The average yield on advances has gone up to 10.9 per cent from 10.5 per cent while the cost of deposits has gone down to 5.7 per cent from 5.9 per cent a year earlier.The bank also increased its share of low-cost deposits in its total deposit portfolio to 39 per cent from 36 per cent a year earlier, Drabu said. It has also increased its provisions on tax and investment portfolio to Rs 87 crore from Rs 48 crore a year earlier, he added.Giving reason for the hike, Chakrabarty said margins are under pressure following the tight monetary stance of the central bank. In order to maintain profit margins it was necessary to revise the rates.Meanwhile, PNB posted a net profit of Rs 512.40 crore for the quarter ended June 2008, a 20.54 per cent increase from the corresponding period a year-ago. Total income increased to Rs 4,594.62 crore for the quarter ended June from Rs 3,795.12 crore a year ago.
