Date:23/06/2006 URL: http://www.thehindubusinessline.com/2006/06/23/stories/2006062301630600.htm

Back Union Bank may raise rates on some retail products

Our Bureau

Need to revise rates due to the risk profile'

Mumbai , June 22:

Union Bank of India may increase rates on some retail products such as home loans, trade finance and auto finance. The decision will be taken in the next 10 days, said Mr M.V. Nair, Chairman and Managing Director, Union Bank of India.

Revision must

"We need to revise the rates on these products due to the risk profile," he said.

The bank is also looking at increasing deposit rates, he added.

BPLR hike

In May 2006, the bank had hiked its benchmark prime lending rate (BPLR) by 50 basis points to 11.25 per cent. Though this automatically pushed up the floating home loan rates, the bank did not increase the fixed home loan rates.

Home loans form 40 per cent of the bank's total retail portfolio at Rs 11,000 crore. Trade finance forms 47 per cent of the retail advances.

"We have projected a net interest margin of 3.07 per cent and we will be able to achieve it this year," Mr Nair said.

The Reserve Bank of India had increased the short term lending rate by 25 basis points in June, indicating a hardening interest rate scenario. Many banks are expected to raise their lending and deposit rates following the central bank's move.

Earlier this month, ICICI Bank increased the rates on home loans and HDFC Bank increased its BPLR and deposit rates.