Interest rates are moving up

Liquidity position for banks has come under pressure due to an outgo of Rs 20,000-25,000 crore on account of advance tax payments and Rs 9,000 crore going out for auction of government bonds. Hike in the cash reserve ratio is also expected to absorb Rs 13,500 crore from the banking system.

As a result, most of the banks including Public sector are planning to hike the lending rates. The country’s largest private sector bank, ICICI Bank, has already increased its BPLR. Centurion Bank of Punjab also raised its lending rates by 50 basis points,

Further in order to mobilise funds, most banks are now compelled to increase the deposit rates. ICICI and State Bank of India (SBI) have raised interest rates in the range of 25-75 basis points for retail term deposits. Centurion Bank of Punjab deposit rates are increased by 25-50 basis points.

This interest hike will directly impact the borrowers of home loan and other loans, however, depositors will be benefited due to the increase in deposit rates.

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