SBI increases base lending rate by 20 bps

SBI has become the second bank to have raised its base rate after the RBI announced its quarterly monetary policy on October 29.

State Bank of India SBI raised its base lending rate by 20 basis points bps to 10 per cent on Wednesday,pushing up EMIs across the board,including on home loans. The state-owned lender also raised its benchmark prime lending rate by 20 bps to 14.75 per cent. The increase in rates would be applicable from Thursday.

If you see,since September 20 the repo rate has gone up by 50 bps and so we thought it necessary to raise these rates. But having raised them,we tried to raise it to the minimum extent possible. Even after raising,we continue to remain one of the cheapest in the market, Arundhati Bhattacharya,chairperson,SBI,said.

SBI has become the second bank to have raised its base rate after the RBI announced its quarterly monetary policy on October 29,where it raised the repo rate by 25 bps to 7.75 per cent,while cutting the marginal standing facility rate by the same quantum to 8.75 per cent. HDFC Bank,too,had raised its base rate by 20 bps to 10 per cent on Tuesday.

Analysts see the rate action by SBI as a way to protect net interest margins NIM in the banks domestic business. Domestic margins for the bank have registered a constant downward trend in every quarter since March 2012. From a 4.17 per cent NIM reported as on March 31,2012,it dropped to 3.44 per cent in the quarter ended June 30,2013.

This action is not to align with the market. This has got to do with the increase in repo rate and the impact on margins. SBI has always been cautious of its NIM position and deposit rates are still quite firm. The only rates they could tinker with are the lending rates, said Rajiv Mehta,an analyst with IIFL.

When asked if the hike in base rate will affect SBIs credit growth,Bhattacharya said the recent spike in credit growth witnessed by the banking system was due to high interest rates in the short-term money market. As commercial paper CP rates soared during August and the first half of September,corporates found it unaffordable to raise funds and thus shifted to the cheaper bank loan market,resulting in an impressive credit of 17 per cent-18 per cent for the banking system.

As CP rates are correcting,the CP portion of the demand has moved back. But you must remember the busy season is starting. We expect to see 17 per cent-18 per cent credit growth this year, she said. FE

Axis Bank revises fixed deposit rates

Story continues below this ad

new delhi: Axis Bank has revised interest rates on select maturities for fixed deposit amount less than Rs 1 crore. In two buckets,there has been an upward revision of 0.25 per cent while there is a downward revision of 0.25 per cent in nine buckets.

Term deposits between 13 to less than 15 months now attract 8.75 per cent,up by 0.25 per cent. In case of term deposits between 46-60 days,rates have been revised downward by 0.5 per cent from 8.5 per cent earlier. The new rates are effective from November 1,according to the Axis Bank website. PTI