PNB, Axis Bank raise rates

A day after the Reserve Bank of India’s (RBI) monetary-tightening measures, banks on began raising interest rates, effecting the hike for the second time in a month.

Punjab National Bank (PNB), the country’s second-largest public sector lender, today announced a percentage point increase in the prime lending rate (PLR) to 14 per cent, while raising deposit rates by 75-100 basis points. The maximum deposit rate on offer will be 9.75 per cent a year.

Axis Bank, the third-largest private sector lender, however, opted for a more moderate PLR increase of 50 basis points. In a statement, the bank said its PLR will increase from 15.25 per cent to 15.75 per cent with effect from today. PNB’s rate hike will take effect from August 1.

The big boys — State Bank of India (SBI), ICICI Bank, HDFC Bank and HDFC — have, however, so far, remained silent on how they will respond. SBI’s asset-liability committee (Alco), which met within hours of RBI’s decision to raise the repo rate, or the rate at which it lends to banks, by 50 basis points and the cash reserve ratio (CRR), or the proportion of capital banks set aside, by 25 basis points, is expected to reconvene tomorrow.

Since April, the central bank has increased CRR by 150 basis points and the repo rate by 125 basis points to tighten money supply and combat inflation, which was estimated at 11.89 per cent in the first half of July.