HDFC Bank on Tuesday increased its base rate, or the minimum lending rate, by 20 basis points (bps) to 10 per cent from 9.8 per cent, with effect from November 2.

This makes it the first bank to hike rates after the RBI raised the repo rate by 25 basis points to 7.75 per cent last week. Repo is the rate at which banks borrow from the RBI. The increase in the base rate will push up the equated monthly instalments (EMIs) of borrowers.

“Our rates are still one of the lowest in the industry. The base rate depends on the deposit growth, key policy rate and yield on the government securities. Our corporate loans, short-term and working capital loans are linked to the base rate,” said Ashish Parthasarthy, Treasury Head, HDFC Bank, the country’s No 2 private lender.

However, lenders such as State Bank of India and Bank of India have kept their base rate unchanged after the asset liability committee (ALCO) meet review following the October 29 policy.

V. R. Iyer, Chairperson and Managing Director of Bank of India, said the bank is not looking at increasing its base rate. S. S. Mundra, Bank of Baroda Chairman, said, “We will maintain status quo on our base rate for now. Each bank will look at the liquidity situation and the deposit growth while deciding the base rate. We are comfortable with the liquidity at present.”

Deposit rate hike

Banks such as Axis Bank and Oriental Bank of Commerce have hiked their deposit rates to increase liquidity.

“Short-term deposit rates have come down and we do not see much change, going forward. We have increased our deposit rates in select buckets,” said an Axis Bank official.

Another private sector bank official said banks will rationalise their rates in select pockets though most have passed on the previous interest rate hike and will refrain from doing so this time.

>beena.parmar@thehindu.co.in