Following the lead of various public and private sector lenders, including the highest public sector lender, SBI, the Canara Bank, has decided to hike its benchmark prime lending rate (BPLR) by 50 basis points. However, Canara Bank has done this with a difference. Announcing it on Friday, the bank has decided to leave home loans and auto loans out of the purview of the hike in the interest rates.

Talking on behalf of the bank, M B N Rao, Chairman and Managing Director, Canara Bank said that the bank had decided on a 50 basis point hike in BPLR (benchmark prime lending rate), taking it to 13.25 per cent, but said that the hike would not cover home loans and auto loans. This will be a welcome relief to its customers. Following the RBI’s dual hike in repo rate and CRR, most of the banks have decided to increase their lending rates, severely affecting customers who have subscribed to floating rates of home loans.

However, making the banks’ stand very clear, the CMD said that the bank had decided not to apply the hike in BPLR to home loan and auto loan customers only ‘for the time being’.

Last Tuesday, the RBI had announced a hike of 50 basis points in the repo rate and the CRR, so as to tighten the supply of money in the economy. This move has been taken so as to curb the ever increasing inflation rate, which is at a 13 year high of 11.42 percent.

Rao feels that home loans are not linked in any way to inflation and hence, increasing its rate would only have an undesired negative effect on the consumers. He believes that it is not among the causative factors for the inflation, which continues to be high due to various reasons, including high fuel costs and other external pressures.

Also, he believes that housing loans are not a short-term proposition and are part of a life-long investment by the customers with whom Canara Bank has a well-rounded relationship. Expecting inflation to reduce over the coming months, Rao does not want to tinker with these loan rates, and hence, spoil those relationships with their customers.

Complementing his banks’ commitment towards their customers, Rao pointed out that the bank had dropped the BPLR in the first quarter and this time also, had waited before hiking it.