Taking bank loans will pinch consumers a little harder this year, as some of country's largest lenders have hiked the base rate, or minimum rate of lending, as of today. Smaller banks too have done the same.
SBI has increased its base rate by 40 basis points (bps) to 8 per cent; while ICICI Bank has hiked its rates by 50 bps to 8.25 per cent and prime lending rate (PLR) by 25 bps.
Following suit, Kotak Mahindra Bank (KMB) has raised base rate and PLR by 25 bps. KMB's new base rate is now 8.25 per cent. Other smaller banks are also doing the same.
The base rate is the benchmark, and any revision in this affects all other loan rates. The increase in lending rates is mainly due to a sharp increase in banks' cost of funds.
While most banks hiked retail deposit rates by 50-150 bps in December, short-term rates have also moved up. The interest rate on three-month certificates of deposit has gone up by 250 bps since the beginning of October.
Traditional private banks, which usually wait for cues from bigger players in the banking industry to make a move on raising deposit or advance rates, now seem to be taking such decisions ahead of their counterparts.