SBI hikes rates ahead of RBI policy review
19 September 2013
A day ahead of the monetary policy statement by the Reserve Bank of India (RBI), the country's top lender State Bank of India (SBI) today announced hikes in some deposit rates and the minimum lending rates.
SBI raised the interest rate on term deposits below Rs1 crore by 0.25 per cent to 1 per cent for different tenures.
The base lending rate will go up by 10 basis points to 9.8 per cent from 9.7 per cent, the country's largest bank by assets said in a statement.
The Benchmark Prime Lending rate will also simultaneously go up by 10 basis points to 14.55 per cent per annum from the earlier rate of 14.45 per cent.
The new rates are effective from today.
Since these two rates determine the bank's lending rates for home, auto and other loans, these are also expected to go up.
For term deposits, SBI hiked the rates for deposits in the 7 to 179 days tenor to 7.5 per cent from 6.5 per cent, the sharpest in recent times.
For deposits of one year and up to 10 years, the rate has been raised to 9 per cent from the earlier 8.75 per cent.
SBI also decided to hike interest rate on term deposits from 180 to 210 days period to 6.8 per cent from 6.5 per cent and for tenors of 211 days to less than one year to 7.5 per cent from 6.5 per cent.
SBI said the hike in both deposit and lending rates was necessitated by the increasing cost of raising funds. Moreover, with its peers offering higher rates on deposits, SBI said, there was no alternative than offering higher rates to attract deposits.
Higher fund cost would automatically reflect in lending rates and hence the hike in lending rates, sources at the bank pointed out.
"Cost of cash in the system has increased and there was also a need to align our deposit rates to the higher rates being offered by our peers in the market," reports quoted a senior official of the bank as saying.
The Reserve Bank of India in mid-July capped the funds banks can borrow from it at its policy rate of 7.25 per cent and made borrowings above this limit more expensive, as part of its efforts to prop up the rupee.
A section of the market expects the RBI to reverse the measures at its mid-quarter monetary policy review due tomorrow.