Also raises fixed deposit rates along with Axis Bank and Karnataka Bank
State Bank of India has hiked its lending rates, including the base rate and prime lending rates, by 20 basis points (bps).
This hike will also have an impact on other retail loans such as home loans and auto loans of the bank.
“SBI has revised the Base Rate by 20 basis points from 9.80 per cent per annum to 10 per cent per annum, and the Benchmark Prime Lending Rate by 20 basis points from 14.55 per cent per annum to 14.75 per cent per annum effective from November 7, 2013,” SBI stated in a release on Wednesday.
“It has become necessary to increase the base rate by the minimum possible rate to offset the increased cost of funds,” said R. K. Saraf, Deputy Managing Director and Chief Financial Officer of SBI, while talking to The Hindu.
Earlier banks could borrow substantial funds under the Repo. But now banks can borrow only limited funds, which increased the cost of funds.
“In the last three to four months, there have been several developments like, two time repo rate hike, restrictions on the liquidity adjustment facility (LAF) and maintenance of cash reserve ratio (CRR) at 95 per cent every day. These factors have pushed up the cost of funds for the banks,” Mr. Saraf added.
“In addition, the benchmark bond yields have gone up, which had a mark-to-market impact on our portfolio,” said Mr. Saraf.
The benchmark 10-year Government Securities (G-Sec) yields have gone up from 7.8 per cent to 8.7 per cent currently, a rise of 90 basis points.
“The rates will depend on the market situation. If the present scenario continues, we have no intention of re-visiting our rates soon,” Mr. Saraf added. Meanwhile, SBI had increased the retail deposit rate from 6.80 per cent to 7 per cent for the deposits of 180 days to 210 days, with effect from November 1.
Commenting on the Base Rate increase, SBI Chairperson Arundhati Bhattacharya said it was on account of the rise in cost of funds.
The repo rate had gone up by 0.50 percentage point since SBI had last raised it, she said, adding that, the bank had not raised the rates to that extent but by only by 0.20 percentage point. It was in line with the market and the bank Base Rate still remained one of the lowest, she added.
Private sector lender, Axis Bank, too, has also revised the interest rates on select maturities for fixed deposits amount less than Rs.1 crore. In two buckets there has been an upward revision of 0.25 percentage point, while there is downward revision of 0.25 percentage point in 9 buckets. Term deposits between 13 and less than 15 months now attract 8.75 per cent, up by 0.25 percentage point.
Our Mangalore correspondent writes:
Karnataka Bank has also raised its interest rates on domestic deposits by 25 basis points across various maturities effective from Thursday, said a bank release.