PNB, PSB raise interest rates by up to 1 per cent

PNB, PSB raise interest rates by up to 1 per cent

The second largest state-owned lender PNB also decided to raise the lending rates by up to 50 basis points, the bank said in a statement. While the hike in fixed deposit (FD) rates will benefit the savers, rising lending rates would make loans more expensive for auto, home and corporate borrowers with effect from tomorrow.

The depositors can now expect to get an yearly interest of 9.25 per cent on FDs. While the PNB will provide the maximum rate for deposits of 1,111 days, PSB will give the same rate for 1,000-day FDs.

PSB has also announced that it will give an interest of 8.25 per cent and 9 per cent on deposits with maturity of 222 days and 500 days, respectively. As for the lending rates, PNB has also raised the benchmark prime lending rate (BPLR) by 50 basis points to 13 per cent and base rate to 9.5 per cent from 9 per cent.

The decision to raise deposit and lending rates follows the Reserve Bank's monetary policy last week during which the central bank raised its short-term lending (repo) and borrowing (reverse repo rate) by 25 basis points to 6.5 per cent and 5.5 per cent, respectively.

PNB said that it raised the rates, "in response to changing liquidity conditions in the system, inflation, other macroeconomic factors and monetary measures undertaken by the Reserve Bank".

The increase in deposit rates from 25 basis points to 100 basis points for FDs of various maturity periods, PNB said, will "compensate the savers for the negative real rates in view of high inflation and in line with the concern shown by the Governor, RBI in the third quarterly review of credit policy".

Even after the revision, PNB said, its BPLR will be one of the lowest in the industry. Following the Reserve Bank policy, leading private sector lender HDFC Bank had said the it would increase the lending rates but would restrain from hiking the deposit rates.