SBI hikes home loan rates by 25-75 bps

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Our Bureau

Mumbai, Feb. 21

STATE Bank of India on Tuesday hiked interest rates on its home loans by 0.25 to 0.75 percentage points, across all tenors in the floating and fixed interest rate category.

In a statement to the Bombay Stock Exchange, the bank announced that the rate hike would be effective from March 1.

Other leading players in the home loans segment such as HDFC, LIC Housing Finance and ICICI Bank had raised interest rates by 0.5 percentage points earlier this month. IDBI Ltd raised retail lending rates by 0.25 percentage points.

ICICI Bank also raised its prime lending rate by 0.5 percentage points to 11.75 per cent. The Reserve Bank of India had increased reverse repo and repo rates by 0.25 percentage points in its mid-term review of the monetary policy last month, signalling a hardening of interest rates.

Following this, most banks raised their deposit rates. The rising deposit rates and continuing credit growth have put pressure on the net interest margins of all banks.

According to a bank official, banks have been offering as high as 8.25 per cent to 8.5 per cent on one year bulk deposits. However, not all of them have increased lending rates to match the high deposit rates. This has led to an increase in the cost of funds for banks.

Mr P.L. Gairola, Executive Director, Bank of India, said, "We are watching the movement of deposit rates. If they continue to move up, we will have no other option but to increase advance rates. As fresh deposits are available at higher costs, lending rates will also have to be raised in tandem."

Related Stories:
LIC Housing loans to get costlier by 50 bps from Friday
ICICI Bank home loans rate hike from Feb 13
Banks, housing finance cos hike lending rates

(This article was published in the Business Line print edition dated February 22, 2006)
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