The State
Bank of India(SBI) raised its base rate
by 0.2%to 10% per annum from the earlier figure of 9.8%.
Yesterday,
HDFC Bank hiked its base rate by 0.2% to 10%.
This
automatically translates into a hike in consumer loans, though earlier banks
used to come out with a separate release announcing the rate hike for
consumers. Other banks are likely to follow suit.
The
little spike in interest rates by the banks comes in the backdrop of the
Reserve Bank of India (RBI) increasing the repo rate by 0.25% at 2013, October
29 meet.
Repo is
the interest rate at which the RBI lends money to commercial banks. A hike in
repo rate means the cost of sourcing the loan for the banks increases, and this
effect is usually countered with them passing on the hike to consumers.
The hike
comes as an unexpected action by the banks as experts and bankers had earlier
taken an opposite view, saying that the hike in repo
rate by
the central bank RBI has been counterpoised by the deduction in MSF rate by
0.25%.
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