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Mumbai, June 26 Banks have started hiking lending and deposit rates. Two public sector banks – State Bank of India and Union Bank of India – have announced an increase in their prime lending rates by 50 basis points each. Union Bank also raised deposit rates.

SBI’s PLR is now 12.75 per cent and Union Bank’s PLR is 13.25 per cent.

The revision in rates by these banks follows the latest hike in CRR and Repo rates by the Reserve Bank of India earlier this week, by 50 basis points each.

Incidentally, both SBI and Union Bank of India had reduced their PLRs by 50 basis points in February this year.

Other banks are also likely to follow suit. Bank of India is expected to take a decision after its board meeting on June 30, said a senior official of the bank.

Bank of Baroda is also expected to take a decision in a day or two, said a senior bank official.

About 85 per cent of SBI’s loans are linked to the PLR, said Mr Ashok Mukand, Chief Financial Officer, SBI. “We had reduced the PLR in February. Now we have merely restored it,” he said.

With the bank having a deposit base of over Rs 5,00,000 crore, the impact of the CRR will be roughly on Rs 6,000-7,000 crore, as the bank will not earn any interest on that amount, Mr Mukand said.

About deposit rates, he said that the bank was reviewing the issue, but is unlikely to hike them immediately, as it had raised deposit rates in May.

Union Bank of India also increased its interest rates on term deposits by 25–100 basis points, across different maturities. The revised rates will become effective from July 1, 2008.

“Large segments of the public view deposits as an investment avenue yielding safe and assured returns on their savings. To protect their interests, the bank has decided to hike interest rates on deposits”, said Mr T. Y. Prabhu, Executive Director, Union Bank of India.

More Stories on : Interest Rates | Public Sector Banks | State Bank of India

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