“A 0.5% hike in repo rate need not necessarily translate into a 0.5% hike in lending rates,” he further added.

Experts believe that many small and medium sized banks would take a cue from SBI and UBI and are expected to follow their path by increasing their lending rates within a week.

Sources believe that most banks would hike their interest rates in the bracket of 0.50 - 1.00 percent. Also, they believe that most of the banks would increase their lending rate by about 0.50% only. At present, the PLR of Bank of India, Bank of Baroda and Canara Bank stands at 12.75%, while PNB’s lends at 12.5%. Many other PSU banks are charging 13.25%. Over 70% of loans are given at sub-PLR rates—a negotiated rate between the borrower and the lender which is below a bank’s PLR.

Since most loans are disbursed at a floating rate linked to the PLR, an increase in the PLR would lead to existing corporates and retail borrowers paying a higher interest rate on loans. In case of SBI, about 15% of loans are fixed rate while 85% are on floating rate.

Interestingly, most PSU banks had reduced lending rates by 50 basis points in February after the FM called upon them to lower lending rates.

Union Bank of India has hiked its interest rates by different margins for different loans. The bank would continue to offer 9% for 400-day deposits. However, it has hiked rates for all other maturities. It will offer 7.5% for deposits more than 180 days and less than one year against 6.5%. For 399-day deposits, it will offer 8.75%. From 400 days to three years and above, the bank will now offer 8.75%.