Mumbai, Sept. 19: The State Bank of India sprang a big surprise by raising its lending and deposit rates a day ahead of Reserve Bank governor Raghuram Rajan’s maiden monetary policy review.
The country’s largest scheduled commercial bank raised its base rate by 10 basis points to 9.80 per cent and its benchmark prime lending rate by 10 basis points to 14.55 per cent.
The increase in both the base rate and BPLR means that old and new borrowers of home, car and personal loans will now have to pay higher equated monthly instalments (EMIs).
The decisions were taken at a meeting of the bank’s asset liability committee (ALCO) on Wednesday evening, hours before the US Federal Reserve surprised everybody by putting off its plans to taper its $85-billion bond buying programme.
This is the first time that any bank has held an ALCO meeting on the day before the RBI’s monetary policy review. Lenders typically wait for the policy announcement before deciding whether or not to raise or reduce their deposit and lending rates.
Pratip Chaudhuri, SBI’s chairman who retires later this month, delivered another blow to the bank’s customers by raising the spreads on auto and home loans by as much as 0.20 per cent. New housing loans up to Rs 30 lakh will now carry an interest rate of 10.10 per cent against 9.95 per cent earlier. The interest rate on auto loans will go up to 10.75 per cent.
The bank said it was raising the rates because of the liquidity crunch that had raised its cost of borrowings.
The RBI’s policy makers are expected to ease some of the liquidity tightening measures it announced in July that has raised the borrowing costs of banks. On Tuesday, the average call money rate had jumped to 10.43 per cent from 7.36 per cent on the previous day.
Sources close to the bank indicated that the timing of the rate hike was sheer coincidence and was a result of the rising borrowing costs in the banking system. “The bank is not pre-judging what the RBI will do tomorrow; it’s only because of rising borrowing costs,” the official added.
In a bid to garner more deposits, the SBI also announced an increase in deposit rates by 25 to 100 basis points.
The interest rate on deposits with a tenure ranging from 7 to 179 days has been raised to 7.50 per cent from 6.50 per cent earlier.
The rate on deposits ranging from 180 days to 210 days has gone up from 6.50 per cent to 6.80 per cent and that on deposits from 211 days to less than a year from 6.50 per cent to 7.50 per cent. The rate on deposits from 1 year to 10 years will go up to 9 per cent from 8.75 per cent earlier.
It may be recalled that the RBI under the former governor Duvvuri Subbarao had announced certain liquidity tightening measures since mid-July to protect the domestic currency. It led to market rates firming up, forcing private sector lenders such as ICICI Bank and Axis Bank to raise their benchmark rates.