Guwahati: Following a 0.4 percent hike in the repo rate—the rate at which the Reserve Bank loans short-term money to banks—a number of banks increased their external benchmark-based lending rates.

"The bank's Asset Liability Management Committee (Alco) evaluated the lending rate for all loans/advances connected with the policy repo rate and amended the lending rate linked with the policy repo rate based on repo from 4 percent to 4.4 percent," Indian Bank stated in a regulatory filing.

The revised loan rate has been made effective from May 9 for new clients and June 1 for all current customers. ICICI Bank, Punjab National Bank, Bank of Baroda, Central Bank of India, Bank of India, and mortgage lender HDFC Ltd have all announced increases in the repo-linked lending rate.

Banks and financial institutions are raising interest rates after the RBI raised the repo rate and cash reserve ratio (the proportion of total deposits held by banks with the RBI) by 40 basis points and 50 basis points, respectively, earlier this week.

Following an unexpected Monetary Policy Committee (MPC) meeting, the Reserve Bank raised the benchmark repo rate by 0.4 percent to 4.4 percent with immediate effect, aiming to contain surging inflation.