SBI loans now costlier; deposits to earn more

Lending rates up by 25 basis points,deposit rates by 100 bps.

Joining the rate-hiking spree,State Bank of India (SBI),the largest commercial bank in the country,on Thursday increased lending rates by 25 basis points (bps),making home,auto and other loans more expensive. However,cheering savers,the bank also raised deposit rates on some tenures and eased penalty on premature closure of deposits.

The bank revised the base rate or the minimum lending rate upwards by 25 basis points,or 0.25 per cent,to 9.50 per cent with effect from July 11. It has also raised its benchmark prime lending rate (BPLR),used to determine floating interest rate loans,to 14.25 per cent from 14 per cent. This will lead to a rise in the EMIs of existing customers.

The interest rates on fixed deposits with a maturity period of 1-2 years has gone up from 8.25 per cent to 9.25 per cent. The new deposit rates would also be effective from July 11. The decision follows the rate hike announced by the Reserve Bank in its policy review last month.

According to SBI,deposits for 7-90 days will fetch an interest rate of 7 per cent as against 6.25 per cent. The interest rates for fixed deposits with a maturity period of 3-5 years will be 9.25 per cent as against 8.25 per cent. The rates on 2-3 years will go up from 8.75 per cent to 9.25 per cent. SBI has also decided to waive the penalty for premature withdrawal of deposits up to 90 days. For premature withdrawal of other deposits,it reduced the penalty to 0.50 per cent from 1 per cent.

On June 16,the RBI increased the repo rate banks borrowing rate from the RBI under the liquidity adjustment facility (LAF) by 25 bps to 7.50 per cent with immediate effect. Consequently,the reverse repo rate the RBIs borrowing rate from banks under the LAF increased by 25 bps to 6.50 per cent.

Besides SBI,two other lenders Punjab & Sind Bank (PSB) and Dhanlaxmi Bank also announced increase in lending rates by 25 bps each,with immediate effect. After the increase,the base rate of PSB and Dhanlaxmi Bank now stands at 10.25 per cent While the BPLR of PSB now stands at 14.75 per cent,it is 19.25 per cent for private sector lender Dhanlaxmi bank.

Last week,ICICI Bank and public sector lenders like Indian Overseas Bank,Corporation Bank and Dena Bank had hiked their base rate by 25 bps each.

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On the credit growth target for the current fiscal year,SBI chairman Pratip Chaudhuri said,We have scaled down credit growth target between 16 to 19 per cent as against between 19 to 21 per cent projected earlier. 21 per cent credit growth target,as of now looks virtually ruled out.

Bank to seek govt nod on rights issue

State Bank of India will seek the governments nod to raise Rs 20,000 crore through the rights issue within this month,the banks chairman Pratip Chaudhuri said. Draft proposal (for the rights issue) is with us. We are going to submit it this month to the ministry, Chaudhuri said. The government would continue to hold 59 per cent stake in the bank after the rights issue,he said,adding as of now,there is one proposal which is on the table.