Home, auto and consumer loans are expected to become costlier with the country's largest lender State Bank of India (SBI) raising its lending rates by 0.20% with effect from Thursday.
The bank has revised the base rate or the minimum lending rate to 10% from 9.80%, SBI said in a statement.
At the same time, the Benchmark Prime Lending Rate (BPLR) was also raised by 0.20% from 14.55% to 14.75%.
Upward revision in the lending rate by SBI may prompt others public and private sector banks to follow suit.
The decision come a day after HDFC Bank raised the base rate by 0.20% to 10%.
Earlier this month, SBI raised fixed deposit rate by 0.2% on select maturity.
With the revision, term deposit between 180-210 days less than Rs 1 crore now earn 7 % against 6.80 % earlier.
Last week, RBI raised short-term lending (repo) rate by 0.25% to 7.75%, making cost of fund expensive for the banks.
At the same time, the RBI lowered marginal standing facility (MSF) rate by a similar margin to 8.75%.
Accordingly, the bank rate was reduced to 8.75% with immediate effect.
Consequently, the reverse repo rate is adjusted upward to 6.75%.
The RBI has left unchanged other rates such as the cash reserve ratio at 4% and the mandatory holdings in government securities and other liquid assets as a solvency measure - Statutory Liquidity Ratio (SLR)- at 23%.
SBI had last raised base rate by 0.10% to 9.80% in September this year.