SBI raises PLR 100 basis pts

Nearly two weeks after the Reserve Bank of India’s latest monetary-tightening measures, the country’s largest lender, State Bank of India, raised its benchmark prime lending rate (PLR) 100 basis points to 13.75 per cent from tomorrow (Tuesday). This makes the bank only one of three — Punjab National Bank and Central Bank of India are the other two — to increase lending rates so sharply. Most other banks have raised PLR 50 to 75 basis points. ICICI Bank and HDFC have increased lending rates 75 basis points, and HDFC Bank and Axis Bank have announced increases of 50 basis points each. Despite this, SBI’s PLR is still lower than most other banks CURRENT ACCOUNT (New lending rates) Bank Increase (bps) New (%) SBI 100 13.75 Central Bank 100 14.00 PNB 100 14.00 Bank of Baroda 75 14.00 HDFC Bank 50 16.50 Axis Bank 50 15.75 ICICI Bank Corporate 75 17.25 Retail loans 75 14.25 HDFC Floating rate 75 11.75 Fixed rate Nil 14.00 PLR for all banks except ICICI Bank and HDFC SBI also said it would increase deposit rates 25 to 75 basis points effective Saturday. The bank has, however, decided to leave lending rates on home loans of up to Rs 30 lakh — existing and new — unchanged. Interest rate on auto loans will go up 50 basis points. “This exemption would benefit a large body of its customers and encourage them to keep their accounts in proper order. The bank believes that its action would contribute to the revival of these sectors that have witnessed some strain recently and would also enhance demand for credit,” the bank said in a statement. For SBI’s home loan customers with an over Rs 30-lakh ticket size and with a 20-year tenure, the hike will mean an increase of Rs 68 per lakh in the equated monthly instalment, while for ICICI Bank and HDFC the increase will be Rs 51 per lakh. The bank’s Deputy Managing Director & CFO Ashok Mukand said the rate increase was necessary as SBI’s net interest margin (NIM), which was estimated at 3.03 per cent at the end of the first quarter, had been impacted 10 basis points following the RBI’s decision to raise the repo rate, the rate at which it lends to banks, and the cash reserve ratio (CRR), the proportion of deposits banks must set aside, last month. “We will be able to partially cover some of the decrease in NIM,” he said. Having been forced to first cut rates and then hold them, SBI has had to raise rates so steeply because its margin was under pressure, owing to the RBI’s repeated moves, a bank executive said. Since April, the central bank has increased the repo rate by 125 basis points and the CRR by 150 basis points. SBI’s PLR has increased 150 basis points during 2008-09. Another SBI executive said that the bank was expecting rates to moderate next month as inflation was not rising sharply and oil prices were expected to fall.