Private sector lender, Kotak Mahindra Bank has increased its base rate by 25 basis points taking it to 8.25%. The revised rate has come into effect from December 31, 2010.

With the rise in base rate, loans of the banks are set to get dearer by atleast 25 basis points.

"There has been a sharp hike in the deposit rates both on the retail and wholesale side. Base rate is driven by a formula and the hike in deposit rates triggered the increase," the bank's Group President Treasury Mohan Shenoy said.

Rate hike has been on the cards since quite some time with lenders like Union Bank, Punjab National Bank, Bank of India, IDBI Bank, Indian Bank, Indian Overseas Bank, Allahabad Bank, Dena Bank and Standrad Chartered Bank already raising their base rates recently.

The bank has subsequently brought a rise in its benchmark prime lending rate (BPLR) by 25 basis points, taking it to 17%.