Yes bank has followed other banks’ initiatives by hiking their lending and deposit rates. The new developments as announced by the private sector lender would be a hike in the bank’s prime lending rate by 50 basis points and the deposit rates by 25 basis points. These changes would be effective from July 1, a senior official said. The new PLR stands at 16.50 %.
This hike in the PLR is the second by the bank in less than a month. Only last month the bank had raised its PLR by 50 basis points to 16 per cent.
This hike in the PLR has come about due to the dual hike in key rates by the RBI on 24th June. Explaining Yes Banks’ hike, MD and CEO, Rana Kapoor, said, "This is a result of cumulative impact of the series of CRR and repo rate hikes."
He also pointed out that the revision was aimed at protecting the banks’ net interest margin at 3 per cent. Net Interest Margin (NIM) is a measurement of the difference between the interest of the income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits).
On 24th of June, the RBI has raised the repo rate (the rate it charges banks), by 50 basis points to 8.5 per cent. At the same time, the central bank had also increased the proportion of deposits banks must keep with it by hiking the CRR (Cash Reserve ratio) to 8.75 percent from 8.25 per cent.
As explained by the Governor of RBI, Y.V. Reddy, these measures were aimed at reining in inflation, which has surged to 13-year highs. They were also aimed at curbing the demand by reducing the supply of money in the economy.
Yes Bank's cost of funds was around 8.5 per cent, up by 60 basis points in the last one year, while its average yield on advances was around 11.5 per cent, he said.