State Bank of India (SBI) has hiked its base rate by 20 basis points to 10 per cent from 9.8 per cent.

The country's largest commercial bank has also increased its benchmark prime lending rate by 20 basis points from 14.55 per cent to 14.75 per cent.

These changes will come into effect from November 7 (Thursday), SBI said in a filing with the stock exchanges.

Base rate

Base rate is the rate below which banks cannot lend.

With the Reserve Bank of India increasing the repo rate by 25 basis points each in two successive monetary policy review events, it was widely anticipated that the public sector banks would follow suit through lending rate hikes.

With SBI — the country's largest commercial bank — increasing base rate, the other state-owned banks are also expected to go in for a base rate hike, say banking industry observers.

Despite consumer spending and credit pick-up season, the two banks (HDFC Bank and SBI) chose to increase their lending rates, the first ones to do so after RBI’s second quarter monetary policy review on October 29.

Repo rate hike

On October 29, RBI had increased the key policy repo rate by 25 bps to 7.75 per cent citing higher inflation concerns. This would increase the cost of borrowing for banks.

Bank of India and Bank of Baroda chiefs have decided to keep their base rates unchanged at 10.25 per cent each.

On September 19, SBI had last hiked its base rate by 10 bps to 9.80 per cent from 9.70 per cent, a day prior to RBI’s mid-quarter monetary policy review.

Lowest base rate

Canara Bank’s base rate now is the lowest in the industry at 9.95 per cent. This is followed by SBI, ICICI Bank, HDFC Bank and Oriental Bank of Commerce that have a base rate of 10 per cent.

HDFC Bank, India’s second largest private bank, had raised its base rate on Tuesday by 20 bps to 10 per cent, effective November 2.

(This article was published on November 6, 2013)
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