Major Indian private banks HDFC Bank and Kotak Mahindra have, reportedly, hiked finance charges on their credit cards, based on risk perception.

Kotak Mahindra Bank has raised the monthly interest on its credit cards by 10 basis points (bps), reported Business Standard.

An email which the lender sent to its credit card customers was quoted by the news agency as saying that effective 1 January 2014, the bank will charge interest rate of 3.3% to 3.4% a month.

Similarly, HDFC Bank will now charge a monthly interest of 3.25% across all its cards, excluding the super-premium ones. Previously, HDFC Bank charged interest of 3.05%, 3.15% and 3.25% a month, depending on card types.

A senior banker in charge of the retail banking business at a foreign bank told, "Generally, credit card rates are so high that even a 100-bps increase in the cost of funds does not have any material impact. The interest rates on credit cards depend on risk perception. Given the uncertain economic environment, the risk of default has increased. This prompted some banks to increase their rates."

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