labels: SBI, Union Bank of India
SBI, UBI hike home and auto loan rates; others to follow news
30 June 2008

Mumbai: State Bank of India, the country's largest lender and another public sector lender Union Bank of India have announced hikes in consumer lending rates, including home loans and auto finance, by 50 basis points.

SBI and UBI decided to raise the interest rates on all loans such as home loans and auto loans by 50 basis points following a hike in their prime lending rates to 12.75 per cent and 13.25 per cent, respectively.

Other banks are likely to follow suit very soon.

Canara Bank, another state-run lender, which also raised its prime lending rate by 50 basis points to 13.25 per cent, however, left its home loan and auto loan rates unchanged at the previous levels.

Private sector banks like HDFC Bank had raised their prime lending rates by 25 basis points to 15.25 per cent, even before RBI increased its policy rate and have increased the floating rates of home loans in tandem with the hike in PLR.

HDFC Bank sources said the bank may review rates again in the post-hike period. The country's largest private sector bank, ICICI Bank, will also review its PLR soon.

SBI had earlier announced a hike in interest rate on fixed deposit rates by up to 75 basis points effective 30 June.

SBI had also lowered its PLR twice in February to 12.25 per cent.

An increase in the interest rate by half a percentage point on a 20-year home loan increases EMI by about 4 per cent. Home loan rates have soared from 7.5 per cent to 11.5 per cent over the last three years, increasing EMI by almost 35 per cent.

Public sector banks like Punjab National Bank, Union Bank of India and Bank of Baroda are likely to announce the rate increase before 1 July. Depending on the size and capacity of banks, lending rates are expected to go up by 50 to 100 basis points beginning July.
 
 The revision in lending rates, which will see a lengthening of EMIs, spells bad news for the housing and auto companies, as well as manufacturers of consumer durables like TV, washing machines and fridges.

The hike in PLR would also raise cost of borrowing for corporates, affecting credit offtake.

SBI, meanwhile, has announced the waiver of  Rs7,000 crore in loans to 25 lakh farmers. SBI has effected a complete loan waiver amounting to Rs6,000 crore for 19 lakh farmers, and a partial loan waiver that amounts to Rs1,000 crore for 6 lakh farmers. In the OBC category, SBI waived loans to the tune of Rs496.37 crore for 1,21,721 farmers.


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SBI, UBI hike home and auto loan rates; others to follow