Banks have started hiking lending rates following the Reserve Bank move to raise the cash reserve ratio (CRR) and repo rate by 0.50 per cent each in a bid to rein in inflation. State Bank of India, India’s largest commercial bank, announced a hike in its benchmark prime lending rate by 0.50 per cent to 12.75 per cent with effect from Friday.Union Bank of India (UBI) has raised its benchmark prime lending rate by 50 basis points to 13.25 per cent. The new rate will be effective from July 1. Other banks have already indicated that they would be raising the rates in the next few days.According to SBI, the revision will be applicable to all PLR-related lendings and the bank was only restoring its benchmark rates. This means loans (including home, auto and personal) which are linked to PLR would move up. Usually, floating rates on home loans are linked to the benchmark prime lending rate (BPLR). ICICI Bank and HDFC — two leading players in the home loan segment — are expected to take a decision within one or two days.ICICI Bank Jt MD Chanda Kochhar had indicated on Wednesday that if the hike comes, it would be across all the products and all segments. However, banking sources said banks are wary of effecting a steep hike in the home loan segment fearing defaults.Several private sector lenders like HDFC Bank, Jammu & Kashmir Bank and Yes Bank have already hiked their respective BPLRs in the range of 0.25 per cent to one per cent to protect margins recently. “After the hike in CRR and repo rate, the cost of funds for banks is expected to rise. Banks have no other option but to pass on the hike to their customers,” said a banking analyst.
