Existing home,auto and education loans from the country's largest lender,SBI,are set to become dearer,with the bank today saying that it will soon decide on hiking its benchmark lending rates by at least 25 basis points. Saving one's hard-earned money with the bank may also fetch better returns,with the bank planning to review deposit rates as well. "There is an upward bias on interest rates. We are looking at that. Now that our quarterly results are out,we shall review our interest rates," SBI Chairman O P Bhatt told reporters here. Asked about the likely hike in rates,he said: "It has to be a minimum 25 basis points." He said all banks are increasing their deposit and benchmark prime lending rates (BPLR) and the bank is "waiting in the wings". Since July this year,banks have shifted to a base rate,which is a floor for lending rates,from the BPLR. However,existing loans continue to be linked to BPLR,though borrowers have the option to switch to the base rate system. "You can revise the interest rate only once a quarter. The revision will now be for the BPLR," he said. He also refused to provide any timeframe for bringing about the revision. "The deposit rates have almost bottomed out for the industry and there is a definitely an upward bias as far as advances are concerned because of the way RBI is managing the inflation and liquidity," he added. When asked why SBI was mulling a hike in interest rates and not sparing customers when its net interest income (NII) grew by a whopping 45.35 per cent in the first quarter of this fiscal,Bhatt said NII is not only a function of rates,but volumes as well. He attributed the slowdown in industrial growth to single digits at 7.1 per cent in June to non-utilisation of the full capacity of the economy. The RBI had upped short-term borrowing (reverse repo) and lending (repo) rates by 50 and 25 basis points,respectively,in June to tame high inflation. It was part of a series of rate hikes since February this year. Most of the public sector lenders,including Punjab National Bank,Bank of Baroda and Canara Bank,have responded to the RBI decision by hiking their BPLRs by up to 50 basis points. Some of the leading banks,like ICICI Bank,Punjab National Bank,Union Bank of India,Oriental Bank and HDFC Bank,have also raised their deposit rates. Inflation is again showing a rising tendency,with the rate of price rise in food items again reaching double digits at 11.40 per cent in the last week of July.
