Just a day ahead of the Reserve Bank of India’s second-quarter monetary policy review, State Bank of India raised deposit and lending rates.

Competition to garner resources prompted India’s largest bank to increase retail term-deposit rates (below Rs 1 crore) by 25-100 basis points. One percentage point equals 100 basis points.

SBI also nudged its base rate up by 10 basis points to 9.80 per cent (from 9.70 per cent) to offset the impact of the higher deposit rates.

The last time the bank revised its base rate was in February 2013, when it lowered it by five basis points to 9.70 per cent from 9.75 per cent. Base rate is the minimum rate below which banks are not permitted to lend. All loans are priced at, or at a mark up to, this rate.

Following the hike in the base rate, among others, home and auto loans will become a tad dearer.

The benchmark prime lending rate has been increased by 10 basis points to 14.55 per cent.

That it has chosen to hike lending and deposit rates just a day ahead of the monetary policy review could be an indication that SBI expects the RBI to maintain interest rates.

Bankers and economists see the central bank maintaining the status quo on policy rates as inflation remains high and economic growth remains tepid.

ramkumar.k@thehindu

(This article was published on September 19, 2013)
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