Base rate has been adding to the woes of banks. Earlier, banks were concerned of losing short term borrowers to commercial papers (CP) while now they are losing customers to their peers also.

Banks which have comparatively higher base rate than their peers have started losing customers in the market. eg- Vijaya Bank having base rate at 8.25% may lose out to State Bank of India which has base rate of 7.5%.

If this situation persists, then top losers would be Karur Vysya Bank and Karnataka Bank which have highest base rates at 8.5% and 8.75% respectively.

"Those who have set their base rates higher are losing customers to banks that have a lower base rate," said Suresh Ganapathy, head of financial research team, Macquarie Securities.

"Lending is not happening significantly because of the higher base rate. Corporates are going to banks with lower base rate," says Albert Tauro, chairman and managing director, Vijaya Bank.

"To set a higher base rate was a conscious decision on their part. At the end of the day, if the smaller banks were serving the larger corporates, they were doing it at a loss," says Abizer Diwanji, executive director and head of financial services, KPMG.

"We have gained customers from banks which had set a higher base rate than ours. But at the same time we have even lost customers to those banks which had set a base rate below ours," said a senior official of Corporation Bank.

"Smaller banks will be losing market share going forward. As interest rates rise, they will become more uncompetitive vis-a-vis the larger peers. If they charge the same rates as larger banks, they will lose out on margins. Similarly, if they charge a higher rate, they will lose out on customers," says Vaibhav Agrawal, vice-president (research), Angel Broking.

"When our loans will come for renewal, we will take a call on whether the rates are acceptable," says RR Nair, director and chief executive, LIC Housing Finance.