SBI sets base rate for lending at 7.5 per cent
29 Jun 2010
State Bank of India (SBI) has set a 7.5 per cent per annum base rate for lending, effective 1 July. The move comes ahead of the Reserve Bank of India's (RBI) review of monetary policy scheduled for 27 July.
SBI chief financial officer S Ranjan said the bank fixed the base rate at 7.5 per cent on the basis of the cost factors. He said he expected other public and private banks also to operate in a 7.5 - 8 per cent band.
However, Ranjan said there might not be any significant fall in demand in a rising interest rate scenario.
Bank of Baroda, Punjab National Bank and ICICI Bank are expected to announce their base rates in a day or two.
RBI had directed all the banks to switch over to the base rate system from the existing benchmark prime lending rates (BPLR) system with effect from 1 July. All new loans sanctioned after 1 July and those falling due for renewal from 1 July (except exempted categories as per RBI guidelines) will now be priced with linkage to the base rate.
The new rule does not apply to finance companies, including mortgage firms such as Housing Development Finance Corp. They may continue with the BPLR mechanism while charging interest rates.
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