SBI, ICICI Bank up lending rates by 50 bps

Mumbai: Country's top two lenders SBI and ICICI Bank on Thursday announced a hike in lending rates by 50 basis points each, making their home, auto and corporate loans dearer.

With this hike, borrowers will have to pay higher EMIs and the tenure of their home and auto loans could also be extended.

A large number of borrowers will be impacted by the hike as both the banks together enjoy over 30 per cent market share.

Both SBI and ICICI have increased the base rate, or the minimum lending rate, to 10 per cent from the existing 9.50 per cent, they said in separate statements.

SBI said its asset-liability committee, which met here on Thursday, also decided to hike rates on loans under the old BPLR (benchmark prime lending rate) system by a similar 50 basis points to 14.75 per cent, making loans for existing borrowers dearer by at least 50 basis points.

ICICI Bank too announced an increase of 50 basis points in its benchmark prime lending rate and in its floating reference rate for consumer loans (including home loans).

The revised rates of both lenders would be effective from August 13.Following the Reserve Bank's decision to raise short-term key rates in its first quarter review of monetary policy last month, lenders have responded by increasing interest rates. Major lenders including SBI, Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce have raised interest rates.In the major bank category, HDFC Bank is the only bank which have not so far raised rates following July 26 policy.

Rate Hike.

ICICI Bank said, the fixed rate customers will not be impacted by the rate hike and their contracted rates will remain unchanged. Meanwhile, SBI increased its deposit rates in the 180-240 days basket to 7 per cent per annum as against 6.50 per cent earlier, the statement said.

However, interest rates on other fixed deposits have been left unchanged.

SBI has raised its lending rate by as much as 2.40 per cent during the year. The base rate was raised to 8 per cent from 7.40 per cent in January this year.

The rate hike announcement came within hours of bank Chairman Pratip Chaudhuri hinting at a hike.

“The RBI has increased the policy rates by 0.5 per cent. So I think we will have to transmit these rates both for our depositors as well for our borrowers," Chaudhuri said.

The RBI had hiked its key short-term lending rates by a higher-than-expected 50 basis points on July 26 to tame the uncomfortably high inflation number, which stood at 9.44 per cent in June. This was the 11th hike by the central bank since March 2010, when it switched over from the monetary policy loosening stance adopted during the financial slowdown to one for curbing inflation.

Following the RBI hike, almost all major banks have hiked their base rates in the range of 25-100 basis points. Though music to the ears of policymakers at the Mint Road, borrowers are a harried lot as loan servicing has become dearer.

Source: Financial Express