SBI, PNB hike retail lending rates by 20bps

State-run lenders State Bank of India and Punjab National Bank on Thursday raised their lending rates by up to 20 basis points, a move that will push up the cost of all retail loans, including home, auto and personal loans – both existing as well new.

State Bank of India, India's largest lender, also on Thursday increased the one-year marginal cost of funds based lending rate (MCLR) by 20 basis points to 8.15 per cent from 7.95 per cent across various maturities.

While SBI raised its one year MCLR by 20 basis points to 8.15 per cent, PNB increased its lending rates by 15 bps to 8.30 per cent.

The overnight MCLR rate has been increased from 7.70 per cent to 7.80 per cent, while the six-month MCLR has been increased from 7.90 per cent to 8.00 per cent earlier.

The two-year MCLR rate has gone up to 8.25 per cent from 8.05 per cent. Also, the three-year MCLR rate has been raised to 8.35 per cent from 8.10 per cent.

The decision comes a day after the bank announced a 50-bps hike in term deposit rates across various maturities.

On 28 February, SBI increased the interest rate on various term deposits with immediate effect. For retail domestic deposits below Rs1 crore, SBI fixed interest rate at 6.40 per cent while the interest rate on one-year deposit has been raised from 6.25 per cent to6.75 per cent. Senior citizen for the same amount of deposit and tenure will earn 6.90 per cent against 6.75 per cent earlier.

The proposed rates of interest shall be made applicable to fresh deposits and renewals of maturing deposits, SBI said.

SBI defended the lending rate hike saying, "in the past one month, liquidity situation, which used to be in surplus has become neutral or maybe in a minor deficit mode.

"Also bond yields have gone up by around 125-150 basis points over the past few months. Given the liquidity situation, some alignment was required and it has been done today," SBI managing director and head of retail and digital banking PK Gupta said.

The lending rate hike also comes in the wake of banks as a whole seeing pick-up in credit demand. After many years of low single-digit credit growth, the quarterly loan demand crossed the double-digit mark at close to 11 per cent in the three months to December 2017.

Gupta said even after this increase, SBI's lending rate is marginally lower than what other banks are offering. "Earlier, the whole market was in a downward cycle but now the feeling is that the risk for inflation is on the upside only. We think that the downward cycle is over and the rate should probably remain stable around the current rates for some time," Gupta of SBI said.

The State Bank raised its six-month MCLR by 10 bps to 8 per cent, while its three-year loan pricing goes up by 25 bps to 8.35 per cent.

The Delhi-based PNB, which is in the throes of a huge financial fraud and staring at a possible loss of around Rs13,000 crore, has also followed its larger peer by hiking its one year MCLR rate by 15 bps to 8.30 per cent.

PNB, which is the second largest public sector lender, also raised the overnight, one-month, three-month and six- month rates by 15 bps to 7.80 per cent, 7.95 per cent, 8.10 per cent and 8.25 per cent, respectively.

PNB also increased its retail and bulk term deposits by up to 45 basis points today. For retail deposits maturing in one-year to three-year, rate has been increased by 25 bps to 6.75 per cent. The bulk deposits for one year maturity has been increased to 6.75 per cent from 6.50 per cent.