Following the RBI’s hike in repo rate and CRR, the banks have reacted accordingly by hiking their lending and deposit rates. Major Banks like SBI, ICICI and HDFC have taken steps which would make all types of loans, home, auto and other retail loans more expensive for the Indian consumer. These banks have hiked their lending rates upto the tune of 0.75 percent more. This move was, however, expected, as the RBI’s intention was to reduce the supply of money in the economy, and hence, put an end to the surging inflation.

HDFC Bank, on its part, has decided to raise the minimum floating rate for home loans for its existing as well as new customers. The new customers would have to settle for a floating rate of 11 percent, up by 0.75 percent from 10.25 percent, while the existing customers will have to shell out 0.50 percent more than the present value of 10.25 percent i.e. 10.75 percent. Both these rates would be effective from 1st July. The bank has also hiked its fixed rate by 0.75 percent, and now stands at 14 percent.

Similar to HDFC Bank, ICICI Bank has increased its benchmark floating rate for retail customers, including home loan borrowers, by 0.75 percent. The new rate of 13.50 percent has been effective from Monday, 30th June. However, for existing floating rate customers, the increase will be effective from 1st July. The fixed rate customers will be at an advantage if they have fully disbursed their loans. The bank said that in such a case, they not be impacted by the increase and will have to pay the prevailing rate. The bank has also decided to hike in benchmark rate for corporate loans by the same amount (by 0.75 percent) to 16.50 percent.

In addition to this, both the banks have hiked their deposit rates. While HDFC bank increased its deposit rates by 0.50 percent across most maturities, ICICI Bank raised its interest rates on fixed deposits of less than Rs 15 lakh by 0.50-1 percent. Both these changes would be effective from Tuesday.

The announcement by these two private sector banks closely follows a similar announcement made by the largest lender State Bank of India.

SBI Chairman O P Bhatt said that effective from 1st July, interest rates on all loans linked to prime lending rate will rise by 0.50 percent. These also include housing and auto loans.

Other banks like PNB, Bank of India and Vijaya Bank too have already announced an increase in their prime lending rates, in order to ensure a tighter monetary stance as desired by the RBI to tame double digit inflation.