Mumbai, Feb 27: Bank of America on Friday raised its prime lending rate by two percentage points to 18.5 per cent. The bank is planning to review its PLR on a weekly basis keeping in mind the volatile liquidity scenario. The bank had raised its PLR to 16.25 per cent from 14.50 per cent on January 21 after the Reserve Bank announced a string of tight money measures including rise in bank rate by two percentage points (to 11 per cent) and banks' cash reserve ratio (CRR) by 50 basis points (to 10.5 per cent).ANZ Grindlays and Bank of Nova Scotia kicked off the second round of prime lending rate hike within a week of making the first move even as the overnight call rates zoomed to 120 per cent. They were followed by a new private sector bank -- Centurion Bank which hiked its PLR in February.
Both ANZ and Scotia banks hiked their PLR by two percentage points (200 basis points) in the second round. "Some of the banks are desperate to protect the shrinking spreads following the rise in cost of deposits,"chairman of a Mumbai-based nationalised bank told The Financial Express.
Dena Bank has recently hiked its short-term deposit rates by a whopping four percentage points (400 basis points) to stall the flight of deposits. In the first round, ANZ Grindlays hiked its PLR from 14.5 per cent to 16 per cent and Scotia Bank from 14.5 per cent to 16.5 per cent.
Public sector banks may not go for a second round of PLR hike despite the rise in cost of deposits. At present most of the PSU banks have kept their PLR at 14 per cent. "We will wait till the slack season credit policy is announced in April," said chairman of another nationalised bank.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
