Home loans and auto financing from public sector State Bank of India would be dearer as the lender has decided to hike interest rates by 50 basis points on all credit linked to prime lending rates.
Speaking at a function in Ghaziabad on Monday, State Bank Chairman-cum-Managing Director O P Bhatt said the bank has decided to raise the interest rate by 0.5 per cent on all loans such as home loans and auto loans which are linked to PLR.
The revision in PLR came after SBI raised its PLR from 12.25 per cent to 12.75 per cent last week following Reserve Bank's increasing its key short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 0.5 per cent each.
Referring to the impact on bank's profit margins, Bhatt he hoped to maintain the net interest margin at 3 per cent this fiscal.
SBI had earlier announced to hike interest rate on fixed deposit rates by up to 75 basis points effective from June 30.
State Bank of India in which government has about 60 per cent stake is targeting 40 per cent growth in non-interest income in 2008-09, compared to 28 per cent last fiscal.
The bank had lowered its PLR twice in February to 12.25 per cent but decided to raise by 50 basis points last week.
"The net profit of the bank is likely to be affected next quarter though there is not much on first quarter profits ending today," he said.
He also indicated the bank is expected to set aside at least 10 billion dollars (232.8 million) to provide for depreciation in its treasury portfolio as interest rate rise.