Banks plan to raise lending rates, may cause threat to economy

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Interest RatesPosing a severe challenge to India’s struggling economy, banks are now planning to raise their interest rates.

However, rates pertaining to the Reserve Bank of India (RBI) remains unchanged.

India’s second largest private lender HDFC Bank has recently raised its interest rates by 10 basis points. On the other hand, RBI kept the policy rate unchanged in a bid to foster the economic growth.

Other banks are most likely to follow the trend and inflate their interest rate causing greater concern for the already grim situation of the Indian Economy.

Several issues are ranging from rising rate of funds, a key expense to the lenders and stringent regulatory reforms for liquidity coverage ratios are putting a lot of pressure on the banks. These factors are the possible reasons for the hike in interest rates, according to Ashish Parthasarthy, treasurer at HDFC Bank.

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