SBI, ICICI Bank hike lending rates 50 bps

Loans from State Bank of India and ICICI Bank will become dearer as the banks have raised their lending rates, the second time in the last one month.

SBI on Thursday increased its base rate and benchmark prime lending rate (BPLR) by 50 basis points each to 10 per cent (from 9.50 per cent) and 14.75 per cent (14.25 per cent) respectively. The rate hikes are effective from August 13.

ICICI Bank too put up its base rate and BPLR by 50 basis points each to 10 per cent and 18.75 per cent respectively. In this case too, the rate hikes are effective from August 13.

Barring agriculture advances, which have administered interest rates, the hike in the lending rate benchmarks will impact borrowers of these banks across all other segments including home, auto, corporate and small and medium enterprises.

SBI, India's biggest bank, had last hiked the base rate and BPLR by 25 basis points each in early July to 9.50 per cent and 14.25 per cent respectively.

“We have been very sluggish in raising our lending rates. However, now we have been left with no choice but to raise the rates as our liabilities have got re-priced at a higher rate. We have given a net interest margin guidance of 3.5 per cent for this financial year and we will do all we can to protect the margin,” said Mr Diwakar Gupta, Managing Director, State Bank of India.

Pointing out that there has been a moderation in credit growth, Mr Gupta explained that when interest rates go up, it is but natural for borrowers to become averse to borrowing. However, the bank has maintained the credit growth target at 16-18 per cent for FY2012.

On the deposits front, SBI has increased the interest rate on only one maturity bucket — 180-240 days — by 50 basis points to 7 per cent.

“By increasing the deposit rate at the short-end, our bank is ensuring short-term liquidity. We did not increase the long-term deposit rates as that would give an upward bias to the deposit rates in the banking system,” said Mr Gupta.

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