Public sector banks raise lending, deposit rates
01 Feb 2011
Three nationalised banks, Punjab National Bank, Allahabad Bank, and Punjab & Sind Bank yesterday announced a hike in their lending and deposit rates.
Other lenders are expected to make similar moves as the deposit race hots up with the financial year drawing to a close. The rate hikes come in response to the monetary policy where the apex bank hiked its repo and reverse repo rates-the rate at which it lends to and borrows from banks.
Bankers had been hopeful of an improvement in liquidity position with an increase in government spending. However, far from any improvement, liquidity deficit has worsened in recent days.
The shortfall, yesterday, in funds in the banking system represented by bank borrowing from RBI touched Rs1,15,335 crore more than double the amount of borrowing that RBI is comfortable with.
HDFC, the largest home loan company, is keenly watching SBI's lending rates, while other lenders such as ICICI Bank and LIC Housing Finance usually ensure that their rates are competitive vis-a-vis HDFC.
SBI's rate hike took effect from 3 January and the bank is currently offering 9 per cent on 555 day and 1000 day deposits.
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