Axis bank, others hike interest rates on loans

MUMBAI: More banks have hiked lending rates almost a fortnight after the Reserve Bank of India (RBI) raised key interest rates in its monetary policy. On Monday, Axis Bank raised its one-year marginal cost of lending rate (MCLR) to 8.6% from 8.5% earlier. Syndicate Bank also revised its MCLR and raised rates for the one-year tenor by 5 basis points (100bps = 1 percentage point) to 8.55%, keeping all other rates unchanged.

Last weekend state-owned Andhra Bank too increased the MCLR-based lending rate by 5bps to 8.55% for various tenors. IDBI Bank meanwhile hiked interest rates on term deposits with effect from June 18, 2018. The bank now offers a return of 6.7% on deposits from one year to two years as against 6.5% earlier.

Given the rise in interest rates following bank credit growth outstripping deposits, several non-banking finance companies (NBFCs) like Bajaj Finance have increased rates on deposits. According to rating agency ICRA retail focussed NBFCs would require about Rs. 3.8-4.0 lakh crore of fresh debt funding during FY2019 to support their envisaged portfolio growth of about 20% in FY2019. The accompanying incremental weighted average funding cost is expected to be about 9.3-9.5% as against 8.4%-8.5% in FY2018.