Punjab National Bank Raises Rates

This article was interesting, not least because it helps me to see how the Indian banking system actually works:

Punjab National Bank, India's third biggest by assets, said it increased the interest rate it charges its best customers by quarter percentage point be able to meet a requirement for lenders to hold more cash reserves.

The new prime lending rate of 11.75 percent will be effective Jan. 1, the New Delhi-based bank said in a statement to the Bombay Stock Exchange.

Indian lenders including the State Bank of India, ICICI Bank Ltd. and HDFC Bank Ltd., the nations' biggest by market value, have raised lending rates after the central bank told them to increase the proportion of deposits to be held as cash to 5.5 percent by Jan. 6 from 5 percent.

The Reserve Bank of India is trying to cool the pace of lending, which expanded 29 percent in the year to Dec. 8. In the fiscal year ended March 31 bank lending increased by more than 35 percent, close to the previous year's expansion.

Punjab National's loans expanded 29 percent to 823 billion rupees as of Sept. 30. Outstanding retail credit expanded 48 percent to 198 billion rupees from a year earlier.

India's inflation rate accelerated to 5.32 percent in the week ended Dec. 9, compared with 5.16 percent in the earlier week. The central bank has set an inflation target of 5 percent to 5.5 percent for the year ending March 31.

Set up in 1895 in Lahore, now in Pakistan, Punjab National has more than 4,000 branches, the most after the State Bank of India. The bank is 57.8 percent owned by the Indian government.

Its shares, which rose 64 percent over the past six months, gained 1.8 percent or 9.05 rupees to 515.1 rupees on the Bombay Stock Exchange yesterday.