The Telegraph
Since 1st March, 1999
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SBI ups lending rate

Mumbai, April 7: The State Bank of India (SBI) today raised its benchmark prime lending rate (BPLR) by 50 basis points to 12.75 per cent. SBI’s decision follows the Reserve Bank of India’s (RBI) move to raise both the cash reserve ratio (CRR) by half a per cent and the repo rate by 25 basis points last week.

SBI was, however, silent on whether home loan rates would stand increased following the hike in PLR. A terse communique issued by the bank only spoke about the new PLR.

Sources said interest rates on housing loans will be raised by around 50 basis points. SBI officials were, however, not available for comment.

The country’s largest bank has increased the benchmark rate, known as the State Bank Advance Rate (SBAR), on two occasions in the past four months. It had increased the benchmark rate, which is used to price corporate and retail loans by 25 basis points in December last year and later increased it by 75 basis points again in February.

However, on the second occasion, SBI had excluded all existing housing loans and educational loans, existing and future agricultural production loans of less than Rs 3 lakh and new educational loans of up to Rs 4 lakh from the change in the SBAR. The new SBAR will come into effect from April 9.

For floating rate home loans, the bank levies an interest rate of 10.25 per cent for up to five years and it stands at 10.75 per cent for advances between five to 20 years.

Similarly, the interest rate for fixed-rate loans is 12.25 per cent for 10 years. However, in fixed-rate housing loans, the bank can enforce a ‘force majeure’ clause by which they could be subject to a reset clause in every two years.

Though reports state that SBI has yet again decided not to raise interest rates for its home and education loan customers, it is understood that interest rate on its floating rate home loans could now go up to 10.75-11.25 per cent and it will stand at 12.75 per cent for fixed rate advances. This, however, could not be confirmed from the bank.

SBI is the second public sector bank after Bank of Baroda (BoB) to increase its benchmark rate. Earlier this week, BoB increased its BPLR by 75 basis points to 13.25 per cent. Though the bank raised interest rate on home loans by 50 basis points, there was no change in interest rates on educational loans of up to Rs 4 lakh. For a loan of more than Rs 4 lakh, the interest rate was increased by half a per cent. Interest rate on auto loans was increased by 75 basis points.

Meanwhile, the Industrial Development Bank of India is planning to review its current lending rate in view of the changing trend in the financial market, IDBI chairman and managing director V.P. Shetty said today. The bank had not hiked its rates in the last two months. However, now it would review its current BPLR pegged at 12.75 per cent.

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