Axis bank, the country's third largest private bank, on Friday raised MCLR or marginal cost of funds based lending rate by 10-15 bps. One basis point is one-hundredth of a percentage point. With this, 1-year MCLR rate at the bank stands at the highest 8.5% amongst all leading banks. Shorter tenure MCLR will vary in the range of 8.0-8.4 per cent while 2 and 3-year MCLR rate stands at 8.6 percent and 8.65 percent respectively.

Amid hardening of bond yields, which has now reached levels of 7.84% this week, most of the banks both from the public and private space since the beginning of this year have been increasing their lending rates. And as crude oil price has soared past US$ 80 level, inflationary concerns mount and to curb any financial volatility, it is highly likely that RBI will bring about two rate hikes in the key repo rate this year taking it to 6.75%

In addition as retail inflation for the April month has increased to 4.58% on the back of rising petroleum product and food prices, the government's CPI inflation target of 4.7-5.1% for the H1FY19 is likely to be breached as the MPC in its last meet revised its inflationary forecast for the year lower. Though there are views of inflation settling later in the year to 4.5%.

One-year MCLR at other banks is 8.15% for SBI, 8.4% each in case of Bank of Baroda and Bank of India, 8.3% each at PNB, ICICI and HDFC bank.

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