These private banks have raised lending rates by as much as 100 basis points, following the hardening of market rates even as the central bank holds on to low rates to avoid derailing the economic growth. RBI has started slowly rolling back some liquidity-boosting measures and has indicated it may not hesitate to raise rates. It raised the cash reserve ratio by 75 basis points in the last review.

Banks are raising lending rates to maintain their profitability after they increased deposit rates in the last few months to attract funds that were beginning to go to higher-yielding stocks and real estate. Investors are seeking higher returns instead of safe bank deposits since prices are running far ahead of the interest rates that banks are offering, leading to negative real returns.

With the partial rollback of tax cuts in the budget, cars, televisions, petrol and travel have become expensive, which could fuel inflation further. Food prices are rising at 18%.
Axis Bank was the first to cease its teaser loan rates in February after the monetary policy. The bank was offering a fixed rate of 8.25% for two years. Others who pulled out cheap loans are the government-owned Union Bank and Canara Bank.

But bigger ones that are flush with funds such as State Bank of India and Punjab National Bank and even Bank of Maharashtra are continuing with teaser rates, which the RBI has warned against. Teaser rates loans are those where interest rates are low in early years, but progressively climb, making it tough for consumers to repay.

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