Big curbs

Calcutta, Feb. 2: Indian Bank has raised its home loan rates by 0.25 percentage points from February 1 following a 25-basis-point hike by the Reserve Bank of India in its key short-term lending rate on January 31.

Indian Bank has raised its benchmark prime lending rate (PLR) by 50 basis points to 12.50 per cent from February 1.

Some other banks are also expected to increase their home loan rates. On Wednesday, Yes Bank chairman and managing director Rana Kapoor said the bank would increase its PLR by 50 basis points from February 1. ICICI Bank is also contemplating an increase in its benchmark PLR.

Since a bank’s floating rates for retail loans, including housing loan, are directly linked with their respective prime lending rates, once a bank increases its PLR, the rates for retail loans also go up in the same proportion.

“Banks’ borrowing from RBI becomes costlier when the apex bank raises its repo rate. It is also a signal from the Reserve Bank for the commercial banks to increase their lending rates in tandem. We have followed the regulator and raised our rates,” said K.C. Chakrabarty, chairman and managing director of Indian Bank.

Punjab National Bank may also increase its home loan and other personal loan rates. “We will take a decision in a day or two,” S.C. Gupta, chairman and managing director of Punjab National Bank, said.

However, .P. Bhatt, chairman and managing director of the State Bank of India, said it would not need to increase its benchmark PLR, as the bank had already factored in the possibility of a repo rate hike when it last raised its BPLR to 11.50 per cent on December 26.

“The rate hikes will be bank-specific depending on a bank’s profitability and liquidity positions,” Gupta said.

Indian Bank has also raised its other lending rates by 50 basis points. The bank is coming out with its initial public offering on February 5. “The offer is for 8.59 crore shares and the price band has been fixed at Rs 77 -91 a share,” said M.S. Sundararajan, executive director of Indian Bank.

The government holds a 100 per cent stake in the bank. After the IPO, it will come down to 80 per cent.

Indian Bank’s equity capital before the initial public offering stands at Rs 343.82 crore after the capital restructuring, in which the bank’s accumulated loss of Rs 3,830.14 crore was set off against its original capital base of Rs 4,573.96 crore. It then converted Rs 400 crore as perpetual cumulative bonds issued to the government at a coupon interest rate of 8 per cent.

The bank is planning to set up branches in Hong Kong and Dubai. Indian Bank already has full-fledged branch offices in Colombo and Singapore.