Did SBI know about RBI's repo rate hike?

Did the State Bank of India (SBI) know that a repo rate hike by the Reserve Bank of India (RBI) was in the offing when it hiked its lending and deposit rates on Thursday, a day ahead of monetary policy review on Friday?

According to some market experts, India’s largest lender might have got wind of what was coming. Senior bank officials, when contacted, said they were in meetings and so, could not respond. An e-mail on this issue sent to SBI remained unanswered.

Some analysts, however, had a contrarian explanation. “SBI, like others, was expecting RBI to reduce or maintain status quo on the repo rate. It would have been difficult for it to raise rates if the RBI had, as expected, cut it. So, SBI may have played it safe by hiking the rates by hiking rates a day before the monetary policy,” said a banking analyst with Mumbai based broking firm.

SBI on, Thursday, hiked its base rate by 0.1 percentage point to 9.8% making home loan, car loan and other consumer loans costlier for existing and new customers. The bank also hiked interest rates on fixed deposits by 30-100 basis points (100 basis points make one percentage point)  across maturities. Other major private lenders ICICI Bank, HDFC Bank and Axis Bank had hiked rates last month but SBI had then refrained from doing so saying it had sufficient liquidity.

 

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