The State Bank of India on Wednesday hinted that base rate that will replace the existing prime lending rate (PLR) will be between 7.5 and 8.5 per cent.
“We are working out the number...it could be between 7.5 and 8.5 per cent,” SBI Chairman O.P. Bhatt told reporters on the sidelines of seminar organised by the CII here on Wednesday. The bank would announce the base rate by June 15, he added.
The base rate is the lowest rate that the bank can charge from a customer and is intended to bring about more transparency in the lending operations of banks.
The Reserve Bank has proposed to replace PLR with base rates from July. PLR of SBI is currently 11.75 per cent.
On the liquidity condition in the system, Mr. Bhatt said it is “fairly tight” and likely to continue so in June because there is going to be large outgo on account of advance tax payment and payment towards broadband wireless access (BWA).
Without giving clear indication on whether banks could increase rates post July, he said, “There is already an upward bias on the interest rate. If liquidity is tight there will obviously be an upward bias on interest rates.”
Meanwhile, Mr. Bhatt said the SBI was planning to mop up Rs 20,000 crore through a rights issue along with another Rs 200 crore from bonds this fiscal to fund business growth. “We are expecting to raise Rs 20,000 crore from a rights issue,” he said.
The chairman said the issue may come up by this fiscal end since the bank is currently talking to the Government about it. “It is still at the conversation stage (with the government). That is why if at all it comes up, it would be towards the end of this fiscal,” Mr. Bhatt said.
The government holds about 59 per cent stake in SBI and the rights issue is subscribed by the existing shareholders. “We would like them to put about 60 per cent (in the rights issue),” he said.
Mr. Bhatt said the bank plans to raise around Rs 200 crore in the first half of this fiscal. The money would be raised from the domestic market and bonds would be offered to retail investors. Usually bonds are offered to institutional investors because of large ticket size.
On the liquidity condition in the system, Bhatt said it is “fairly tight” and likely to continue so in June because of the large outgo on the account of advance tax payments and payment towards broadband wireless access and 3G spectrum.