Bangalore: Vijaya Bank is set to raise its benchmark prime lending rate by 50 basis points to 12.25 per cent. A formal announcement will be made soon, bank's Chairman and Managing Director Prakash P. Mallya said here on Tuesday. The bank plans to raise Rs. 200 crore through Tier II capital this fiscal.

Mr. Mallya said the rate increase was in accordance with the industry trend following Reserve Bank of India's move to control inflation. The bank recently revised its rates to augment its deposits base.

He said he saw no liquidity crunch as far as his bank was concerned and felt that with its net interest margin above the comfort zone of three per cent at 3.09 per cent the impact of RBI's announcement of higher cash reserve ratio and repo rates would have little effect on its overall lending business.

This, along with higher cost of fund, could put pressure on credit growth. Vijaya Bank would adopt a selective approach in lending to retail customers as it entailed higher provisioning and risk. Retail lending accounted for 35 per cent with housing loans being 55 per cent of this. During the fiscal year 2006-07, the bank did overall business of Rs. 44,000 core.

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