A day after the Reserve Bank of India (RBI) hiked the repo rate by 50 basis points to 4.9 per cent, several banks have begun increasing lending rates once again, which will lead to costlier EMIs for borrowers.

Private sector lender ICICI Bank has increased its external benchmark lending rate by 50 basis points. “ICICI Bank External Benchmark Lending Rate” (I-EBLR) is referenced to RBI policy repo rate with a mark-up over repo rate. I-EBLR is 8.60 per cent p.a.p.m. effective June 8, 2022,“ the bank said on its website.

Similarly, Bank of India hiked its repo-based lending rate (RBLR). The effective RBLR with effect from June 8 is 7.75 per cent as per the revised repo rate (4.90 per cent), the bank said on its website.

Bank of Baroda and Punjab National Bank, too, increased their retail loans linked to repo-linked lending rate (RLLR) from Thursday. For retail loans, applicable RLLR is 7.40 per cent with effect from June 9 (current RBI repo rate: 4.9 per cent + mark-up: 2.5 per cent),“ BoB said. PNB, on the other hand, hiked it from 6.9 per cent to 7.4 per cent for existing and new customers, effective Thursday.

Deposit rates

Kotak Mahindra Bank has announced a rise in savings account interest rate as well as fixed deposit interest rates across various tenors. The increase in savings account interest rate will come into effect on June 13, 2022, it said.

Daily balances in savings account above ₹50 lakh will now earn a 50 basis points higher interest rate of 4 per cent per annum, from the earlier rate of 3.5 per cent per annum, it said. Interest rates on fixed deposits have been increased by 10 to 25 basis points.

Joining the wagon

More banks are expected to revise their deposit and lending rates in coming days. “Nudged by the RBI, banks have gradually migrated their lending portfolios towards EBLR-linked loans with about 40 per cent of loans across retail segments anchored to the repo rate. Leading private banks have 35-50 per cent of their loan book currently linked to EBLR, with a 3-month reset clause,” said a note by Institutional Research Desk at HDFC Securities.

The re-pricing of the deposit side of the balancesheet is likely to happen gradually, given the surplus liquidity in the system and healthy C/D ratios. Banks have raised their term deposit pricing by about 10-25 basis points over the past few months, it further said.

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