SBI hikes deposit rates by 25-75 bps

SBI hikes deposit rates by 25-75 bps

Retains base rate at 7.5%

SBI hikes deposit rates by 25-75 bps

Mumbai: The State Bank of India (SBI), on Thursday, announced that it will raise deposit rates by up to 75 basis points effective October 1, but it has kept minimum rate of interest on loans, or what is known as base rates (BR), unchanged at 7.50 per cent.

In a filing to the Bombay Stock Exchange, SBI said: “The bank revises upwards the deposit rates by 25-75 bps in various maturities, effective October 1, 2010.”

Alongside the SBI, another PSU lender, Punjab National Bank (PNB)  has raised its base rate or BR – the minimum rate of interest at which it lends – from 8.0 to 8.5 per cent with effect from October 1.  “Rates of interest on domestic term deposits have also been increased by 25 basis points (bps) to 50 bps across various maturity periods with effect from October 1,” said PNB in a notification to the BSE here.

However, PNB has left the Benchmark Prime Lending Rate (BPLR) that existed prior to adoption of the base rate system – that stipulates the minimum lending rate below which the bank will not offer loans — the same at 11.75 per cent. As such, the maximum rates offered by PNB now are 8 per cent for deposits of maturity between 8 and 10 years, it added.

With this latest move, the various deposit rates of SBI are in the range of 4 per cent to 7.75 per cent.  At the same time, SBI stated that it reviewed the base rate — the minimum lending rate below which it cannot offer loans — at the existing level of 7.50 per cent.  As such, the base rate will continue to remain at 7.50 per cent per annum for the present.
In order to bring in more transparency, base rate was introduced as a replacement of BPLR from July 1, 2010.  
Earlier this month, RBI in its first mid-quarterly review had stated, “One important consequence of negative real rates is that banks have seen a deceleration of deposit growth, as savers look for higher returns elsewhere. If bank credit is not to become a constraint to growth, real rates need to move in the direction of encouraging bank deposits.”
Last month, SBI raised its benchmark lending rate by 50 basis points and deposit rates by up to 150 basis points.  Even as the increase in the BPLR to 12.25 per cent made existing home, auto and corporate loans from SBI dearer, at the same time the hike in deposit rates ensured better returns for deposit-holders.
DH News Service