Banks resume lending rate hike after 3 months

14 bps hike in October

- MAHESH NAYAK

AFTER A GAP of three months, banks have resumed raising interest rates on fresh loans. The rates increased by 14 basis points in October to 8.64% from 8.50% in September. Between July and September, banks had cut interest rates on new loans by 31 bps after hiking rates in July by 19 bps from 8.62% in June.

The hike in lending rates comes against the backdrop of the Reserve Bank of India (RBI) cutting the repo rate by 50 basis points in June to 5.5%. System credit in October grew 11.1% yo-y compared with 10.2% in September.

With interest rates on new deposits falling 4 bps in October to 5.57%, banks’ margins will be supported.

While private sector banks raised rates on fresh loans by 12 bps in October, public sector banks saw a 9 bps rise and the average lending rates of foreign banks jumped by 18 bps.