Rate hike started in the sub prime lending category
By Vaibhav Aggarwal
Apr 26, 2010
Print    Email    RSS   

Lending rates have finally started rising with the start from sub prime lending category.

Banks generally lend to credit worthy customers at rates much lower than the Benchmark Prime Lending Rate (BPLR). These rates are terned as sub BPLR rates or sub prime rates. The sub prime customers mainly consist of wealthy corporates and high net worth individuals.

Corporation Bank has started repricing of its short term loans since 1st April 2010. "Now our short-term sub-PLR is in the 6-6.5% range," said J M Garg, chairman and managing director of Corporation Bank.

The bank earlier used to offer loans at rates as low as 3.75 - 4% which is much lower than the BPLR of 12%.

"As interest rates are going up, the tendency to give loans at cheaper rates cannot be sustained," said M Narendra, executive director, Bank of India.

There have been two major reasons that can be attributed to banks changing their short term lending strategy. First, the policy tightening measures in the form of hike in key rates by RBI.

Second factor is the interest calculation on daily basis for savings account as mandated by RBI from 1st April 2010. This has raised the cost of funds of banks by 10-20 basis points.

"Over period of one year, lending rates may go up by 50 basis points," said Abizer Diwanji, head (financial services), KPMG. The first 25 basis points hike may take place in this quarter itself while lending rates may go up by another 25 basis points in the rest of the year, he said.

"Recently we have raised short-term loans from banks at 4.93%. If rates go up further, we will shift to CP," said H D Khunteta, director of finance, Rural Electrification Corporation.


(Comments Posted : 0) Post Your Comments
Show All Comments
 Select a product:

 Select a product:

Insider secrets of Car Loans in India
J&K Bank raises PLR
Bank loans that could glitter for you
Carnival of Indian Personal Finance Blogs #3
New Vs. Used Car loan in India: Benefits...

Hello I am looking to renew my car insurance and I...
my loan no

SBH bank extended its Car and gold loan campaign till 31st March, 2015. Feb 11, 2015
KVGB bank signed MOU with TATA Motors Feb 10, 2015
SBH bank extended its scheme offering concession to loan defaulters Feb 2, 2015
Karnataka Bank tied up with TVS motors to Assist Auto rickshaw buyers Jan 27, 2015
RBI extended the Directions issued to Amanath Co-operative Bank for a period of six months Jan 22, 2015
News Archive