Indian banks have started to hike lending rates as a spike in the country’s sovereign bond yield is making funding costlier.
India’s largest lender State Bank of India today said that it has hiked its marginal cost based lending rate by 10 basis points across maturities. The bank’s one-year MCLR now stands at 8.25 percent as compared with 8.15 percent earlier. The new rates are applicable from June 1, the bank said on its website. Two-year and three-year MCLR have been hiked to 8.35 percent and 8.45 percent, respectively.
Investors have been dumping Indian bonds at a record pace as a rally in global crude oil prices threatens to worsen the country’s finances. That could add to inflation and hurt economic growth which has just started to recover stoked by government spending. India's 10-year benchmark yield has risen 52 basis points this year and that's increasing funding costs for banks.
Other Banks Follow Suit
India's second largest private lender ICICI Bank Ltd. also increased lending rates by 10 basis points across all maturities. The one-year MCLR now stands at 8.4 percent.
Yesterday, state-run Punjab National Bank Ltd. had increased its MCLR by 10 basis points across all maturities. Its one-year MCLR is now at 8.4 percent.
Mortgage lender Housing Development Finance Corp too raised its retail prime lending rate by 10 basis points effective June 2.