Banks hike lending rates after RBI rate hike?

The Reserve Bank of India (RBI) hiked its key policy rates by 25 basis points -- the seventh time this financial year 2010-11. Over the last year, the central bank has raised repo rate and reverse repo rates by 175 bps to 6.75% and 225 bps to 5.75% respectively. Repo is the rate at which banks borrow from RBI and reverse repo is the rate at which banks park their surplus money with RBI.

Following the latest hike, bankers expect lending rates to rise once more before the slack season kicks off. But depositor may have little to cheer about as bankers feel deposit rates may have peaked for the time being. Most banks are offering rates between 9.25 and10.25%.

The non-food credit growth of the banking industry has already surpassed RBI’s indicative projection of 20%. It is currently at around 23% for the fortnight ended February 25, 2011.
Here is a synopsis of the existing lending rates of some frontline banks:

Banks	Base rate	BPLR
Allahabad Bank	9.50% (50 bps)	13.75% (25 bps)
Bank of Baroda	9.50% (50 bps)	13.75% (50 bps)
Central Bank of India	9.50% (50 bps)	13.75% (50 bps)
Corporation Bank	9.40% (50 bps)	13.60% (35 bps)
Dena Bank	9.45% (50 bps)	14.50% (75 bps)
Dhanlaxmi	8.75% (50 bps)	17.25% (75 bps)
HDFC Bank	8.70% (50 bps)	17.25% (75 bps)
ICICI Bank	8.75% (50 bps)	17.50% (50 bps)
IDBI Bank	9.50% (50 bps)	14.00% (25 bps)
Indian Bank	9.50% (50 bps)	13. 75% (50 bps)
IOB	9.00% (50 bps)	13.25% (25 bps)
Kotak Mahindra Bank	8.75% (50 bps)	17.50% (50 bps)
PNB	9.50% (50 bps)	13.00% (50 bps)
SBI	8.25% (25 bps)	13.00% (25 bps)

Commercial banks are not permitted to lend below base rate. However, old customers of banks still continue to repay their loan with BPLR. Banks’ efforts are on to convert their old BPLR customers into base rate system.