BoB set to earn more from loans

APRIL 5, 2007: Bank of Baroda (BoB) today increased its benchmark prime lending rate (PLR) by 75 basis points to 13.25 per cent, the first nationalised bank to do so after the Reserve Bank of India (RBI) raised both the cash reserve ratio (CRR) and the repo rate by 50 basis points (bps) and 25 bps respectively last Friday.

Immediately after the RBI move, private sector entities like Yes Bank, ICICI Bank, Housing Development Finance Corporation (HDFC), HDFC Bank and UTI Bank increased their lending rates by 50 bps to 100 bps.

While ICICI Bank raised the rates on consumer and corporate loans by a big margin of 100 bps, both Yes Bank and HDFC Bank raised their PLRs by 75 bps. Public sector banks had then indicated that they too were likely to raise the rates. It is expected that some of these banks would soon raise rates.

A senior official of the State Bank of India (SBI) reportedly said the bank would probably hike rates next week. Punjab National Bank (PNB), too, indicated yesterday of the possibility of a hike.

In January and February this year, when the central bank hiked the key rates, most PSU banks did not raise their home loan rates.

BoB has now raised the PLR by 75 bps to 13.25 per cent from 12.50 per cent and the rate on home loans by 50 bps.

It added that there was no change in rates on educational loans of up to Rs 4 lakh, while the rates would be higher by 50 bps for loans of more than Rs 4 lakh. The rate on auto loans was raised by 75 bps.

The hikes were effective immediately, the bank said.

BoB is more focussed on retail lending, and its exposure to the home loan segment is not as significant as some of the private sector banks such as ICICI Bank.

Source: The Telegraph