SBI hikes lending rate by 10 bps to 7.6%

SBI hikes lending rate by 10 bps to 7.6%

O P Bhatt

Also, it has increased its benchmark prime lending rate (BPLR) by 0.25 per cent to 12.5 per cent.

It may be noted that the hike will impact existing customers more than new ones because the hike in BPLR (which is applicable to existing customers) is more than the hike in the base rate (for new customers).  Simply put, EMIs or installments for all types of loans including car, home and consumer durables will increase.

SBI – which accounts for about 18 per cent of loans in the country – has hiked the base rate by a smaller amount, perhaps, to lure new customers in the festive season.  As such, taking a new loan from SBI will be bit costlier from Thursday.

With this, SBI has gone for the first review of the base rate from the time it was introduced in July this year. Chairman O P Bhatt had hinted last week about hike in borrowing rate, prompted by tight liquidity and cost of funds, saying: “There has been a huge amount of pressure on liquidity. It is not just getting tighter, but liquidity has become more volatile in the system.”

As per the RBI guideline, banks have to review their base rate every quarter. The revision in base rate follows the RBI’s move to raise short-term lending (repo) and borrowing (reverse repo) rates in its September monetary review.

Consequent to RBI raising its policy rates, the cost of funds for most banks have incresed. However, SBI rates are relatively competitive as compared to other banks because it has access to a large base of low cost deposits called the current account savings account deposits or CASA.

At the same time, bulk deposit rates have had risen in the system recently.  SBI too hiked fixed deposit rates earlier this month by up to 0.75 per cent. It raised deposit rates from 0.25-0.75 per cent across various maturities. 

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