SBI hikes lending rates, others follow suit

MUMBAI, JAN 19: Several commercial banks, led by the country's largest bank State Bank of India, on Monday hiked their lending and deposit r...

MUMBAI, JAN 19: Several commercial banks, led by the country’s largest bank State Bank of India, on Monday hiked their lending and deposit rates following the hike in the bank rate and cash reserve ratio announced by the Reserve Bank of India last week.

State Bank hiked its prime rate — State Bank of India Advance Rate by one percentage point to 14 per cent (exclusive of interest rate) with effect from January 22 while two new generation private sector banks, IndusInd Bank and Global Trust Bank, hiked their PLR by two percentage points to 16 per cent. Both the banks revised the lending rate effective from January 19.

Among the foreign banks ANZ Grindlays took the lead by increasing its PLR by one-and-a-half percentage points from 14.5 per cent to 16 per cent, effective January 20. The bank also increased its medium term PLR from 13 per cent to 14.5 per cent.

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State Bank hiked its medium term lending rate (MTLR) – for term loans of three years and above – by 75 basis points to 13.5 per cent. The MTLR isanchored to bank rate which was raised by two percentage points on Friday. The bank hiked its deposits rates by one to half a percentage points across all maturities.

“We have raised the long term rate by only 75 basis points we believe the Reserve Bank of India measures are temporary in nature and they will have no impact on long term rates,” SBI chairman MS Verma said, adding, “the signal is clear. By holding the interest rates down, we want to ensure that the corporate will to invest should not suffer.”

According to the SBI chairman, interest rates will come down in the next three months. “I am confident that the next credit policy (in April) will trigger investments as the interest rates will come down by that time,” he said.

Both the Bank of Baroda chairman K Kannan and Dena Bank chief Ramesh Mishra said their banks may fix its PLR at a higher level than the State Bank. Corporation Bank chairman R S Hugar said the bank might settle for a one percentage point hike in PLR. "We will take the decision tomorrow," Hugar said. BoB’s management committee will meet on January 24 to decide on its new PLR and deposit rate, Kannan said. The bank revised its interest rate for FCNR(B) deposits on Monday.

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Both the term lending institutions — IDBI and ICICI — will take decisions on new lending rates in the next few days while IFCI is slated to hike its PLR by about a percentage point on Tuesday. After the recent RBI measures, we are reviewing a lot of things,” said IDBI executive director P L Narshimhan. The top brass will consider hike in PLR as well as coupon on the the forthcoming bond issue on Wednesday, he said.