No RBI signal, but lenders kick-off rate hikes in India

Although the Reserve Bank of India (RBI) is yet to jack up key policy rates, interest rates are slowly showing signs of rising in the financial system, in line with the global trend. At a time when global central banks are scheduled to tighten their monetary policies and hike rates, Indian banks and financial entities have started announcing rate hikes.

Even as the Bank of England hiked the interest rates by 15 basis points to 0.25 per cent and the US Federal Reserve decided to accelerate tapering of bond purchases ahead of a rate hike,

State Bank of India (SBI) has raised the benchmark lending rate, or base rate, by 10 bps without waiting for the RBI to hike the repo rate or reverse repo rate. SBI’s revised base rate is 7.55 per cent. Base rate is the minimum interest rate at which a bank could lend to its customers under the base rate regime.

This means the overall interest rate of old borrowers with floating rate loans like home loans linked to the base rate will go up. Home loan customer will have to shell out higher equated monthly instalments (EMIs) or they will have to extend their loan tenure.