SBI hikes PLR by 50 bps

Borrowers will have to shell out more as interest rates. State Bank of India

Borrowers will have to shell out more as interest rates. State Bank of India, the country’s largest commercial bank, has announced a hike in its benchmark prime lending rate (PLR) by half a percent with effect from tomorrow — a move that may prompt other public sector banks to follow suit. The PLR has been hiked to 11.5 per cent from 11 per cent.

Though the bank has not stated the reasons or impact of the hike, the decision would make all loans linked to the PLR, whether corporate or retail, expensive. Further, there could be a repricing of loans offered to corporates on sub-PLR rates, sources said. The impact on the home and retail loan rates is not yet clear but some of them linked to PLR could go up.

The PLR hike is third in the year for SBI, which hiked it by 0.5 per cent first in April from 10.25 per cent to 10.75 per cent and then again in August by 0.25 per cent to 11 per cent. The August hike had forced the Centre to ask all public sector banks to seek the approval of their respective boards before hiking the rates. Other banks — Oriental Bank of Commerce, ICICI Bank, HDFC Bank, Yes Bank and Centurion Bank of Punjab (CBoP) — had raised their PLR following the RBI’s decision to raise cash reserve ratio — the amount of money that banks are required to park with the central bank.

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After the CRR hike earlier this month, ICICI Bank was the first kick off a rate hike. ICICI Bank hiked lending rates by 50 basis points on retail loans. The bank has increased its floating reference rate (FRR) for consumer loans (including home loans) to 10.75 per cent with effect from December 18.

State Bank of India had also increased its deposit rates earlier this month. Banks have been averse to hiking retail lending rates, particularly housing loan rates, due to stiff competition. However, the RBI’s recent move to hike CRR has forced banks to review their strategy.