Axis Bank, India’s third largest private sector bank, today hiked its base rate or the minimum lending rate to 10.25 per cent from 10 per cent earlier.
The new base rate will be effective from August 19, 2013. One basis point is one hundredth of one per cent (0.01 per cent).
Base rate is the rate below which banks cannot lend.
The private lender had increased its short term deposit rates by up to 50-400 bps in select tenures ranging from 7 days to one year.
Recently, YES Bank and HDFC Bank also hiked their base rate after the Reserve Bank of India tightened the liquidity from the banking system making it expensive for the banks’ short term borrowings.
The RBI had kept the key policy rate unchanged in its first monetary policy review in July. However, its liquidity tightening measures taken in July has impacted the short-term rates.
On July 15, the RBI capped banks' borrowings under liquidity adjustment facility and increased the marginal standing facility rate by 200 basis points to 10.30 per cent. The move has led to an increase in cost of funds for the banks if the steps are not rolled back, soon their margins would get affected, bankers said.