State Bank raises lending rate by 50 basis points | india | Hindustan Times
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State Bank raises lending rate by 50 basis points

State Bank of India decides to raise its benchmark prime lending rate by 50 basis points to 12.75 per cent with effect from Friday.

india Updated: Jun 26, 2008 18:11 IST

India's largest lender State Bank of India on Thursday announced a hike in its Benchmark Prime Lending Rate by 0.5 per cent to 12.75 per cent with effect from Friday, a decision that would make loans costlier.

The decision was taken by the bank's Asset Liability Committe (ALCO), which met in Mumbai following Reserve Bank's June 24 announcement of a 0.5 per cent hike in its short term lending rate to banks and cash reserve requirement.

The revision will be applicable to all PLR-related lendings and SBI was only restoring its benchmark rates, SBI's Chief Financial Officer Ashok Mukand said.

The bank had reduced its BPLR in January given the comfortable liquidity conditions prevailing then, Mukand said.

"We are now restoring our PLR which we had reduced some time back. All loans linked to the BPLR will come under the revision," Mukand said.

However, the bank has decided not to revise its deposit rates as it had hiked them only very recently, he said.

SBI's announcement came after a host of lenders such as HDFC Bank, Jammu & Kashmir Bank and Yes Bank hiked their respective BPLRs in the range of 0.25 per cent to one per cent to protect margins.

State Bank's Chairman OP Bhatt had recently said that the bank has seen a pressure on its margins following a steady increase in its cost of funds and would relook its interest rate structure after watching market movements.

"Well, there is a pressure on our margins...We are watching the market conditions closely," Bhatt had said.

SBI's ALCO had met earlier this month after the RBI had effected a 0.25 per cent hike in the repo rate but had decided not to revise its rates.

"The bank will try to absorb the 0.25 per cent repo rate hike by RBI", Bhatt had then said.

However, with the apex bank further hiking its key rate and cash reserve requirement two days ago to arrest ballooning inflation, SBI, in order to protect its margins, has now hiked its BPLR.