Lending rates are on a swift rise, much ahead of the upward movement of deposits. Housing Development and Finance Corporation (HDFC) has, for the fourth time in a month, hiked its home loan rates soon after the Reserve Bank of India (RBI) raised the repo rate by 50 basis points to 4.90%.

The mortgage financier said in a regulatory filing on Thursday that it would increase its retail prime lending rate (RPLR) by 50 basis points with effect from 10 June. RPLR is the rate at which housing finance companies lend to their most creditworthy customers.

On 1 June, HDFC had raised the rate by 5 basis points. The mortgage financier had hiked the RPLR twice in May – On 2 May by 5 basis points and on 9 May by 30 basis points. 

"HDFC increases its RPLR on housing loans, on which its adjustable rate home loans (ARHL) are benchmarked, by 50 basis points, with effect from 10 June 2022," the housing finance company said in a statement.

Punjab National Bank (PNB), ICICI Bank, Bank of Baroda and Bank of India hiked their external benchmark lending rates (EBLR), which are mainly used for pricing retail loans, a day after the RBI came out with its monetary policy. PNB said its repo-linked lending rate will be 7,4% from 9 June.

Bank of Baroda's new EBLR is also at 7.4%, effective 9 June. Bank of India upped its rates by 50 basis points to 7.75%.

ICICI Bank increased its external benchmark lending rate (EBLR) by 50 basis points to 8.60%, effective 8 June. 

The bank had revised its MCLR (marginal cost of funds-based lending rate) on 1 June. Its overnight and one-month MCLR is at 7.30% while the three-month MCLR is at 7.35%, six-month MCLR at 7.50% and one-year MCLR at 7.55%.

Similarly, HDFC Bank increased its MCLR on loans of all tenures by 35 basis points with effect from 7 June. A month ago, the private lender had increased the MCLR by 25 basis points. The overnight MCLR is now 7.50%, according to the bank's website. The one-month MCLR is 7.55%, three-month and six-month MCLR are both 7.60% and 7.70%. The one-year MCLR is 7.85%, the two-year MCLR is 7.95% and it is 8.05% for three years. 

On 7 June, Canara Bank increased its 6-month and 1-year MCLR by 5 basis points to 7.35% and 7.40%, respectively. The MCLR for the remaining tenors remained constant.

The above MCLRs shall be applicable only to new loans. Existing borrowers of the bank shall have an option to switch over to interest rates linked to MCLR (other than fixed rate loans). Borrowers willing to switch over to the MCLR based interest rate will have to contact the branch, Canara Bank stated on its website.

IDFC First Bank announced a change in MCLR on 8 June. Following this, the private lender's overnight and one-month MCLR is at 7.85%, three-month MCLR at 8.05%, six-month MCLR at 8.35% and one-year MCLR at 8.65%. IDFC First Bank's personal loan interest rates begin at 10.49%, house loan at 7.1% for salaried persons and 7.05% for self-employed individuals. Auto loan interest rates begin at 7.75%.

Deposit rates are also going up. Kotak Mahindra Bank announced a rise in interest rates on savings accounts by 50 basis points on daily balances above Rs 50 lakh with effect from 13 June. On fixed deposits, rates would go up by 10 to 25 basis points with effect from 10 June. 

On saving account deposits above Rs 50 lakh, the bank will offer a 4% per annum interest rate from the current 3.50%. However, the rates will be kept unchanged at 3.5% on deposits up to Rs 50 lakh.

ICICI Bank’s fixed deposit interest rate hike came into effect on 7 June.

But for deposit rates to move in line with the policy rate hike the liquidity has to suck out. RBI has stated that there still remains an overhang of excess liquidity in the system, which is keeping average overnight rates below the repo rate.

On 8 June, the RBI announced the repo rate increase by 50 basis points. In May, the central bank had hiked the repo rate by 40 basis points to 4.40% and the cash reserve ratio (CRR) by 50 basis points to 4.50%. The off-cycle hike ahead of the bi-monthly monetary policy in June was taken in the backdrop of rising inflation.