Country's largest lender State Bank of India (SBI) today increased base rate or the minimum lending rate for new borrowers by 0.10 per cent to 7.6 per cent. The bank has also increased its benchmark prime lending rate (BPLR) by 0.25 per cent to 12.5 per cent. The new rates will be effective from Thursday.The hike will impact existing customers more than new ones because the hike in BPLR (which is applicable to existing customers) is more than the hike in the base rate (for new customers). This means that EMIs or installments for all types of loans including car, home and consumer durables will increase.
The bank has hiked the base rate by a smaller amount to lure new customers in the festive season, analysts said.
This is the first review of the base rate since it was introduced in July this year. As per the RBI guideline, banks have to review their base rate every quarter.
The revision in base rate follows the RBI's move to raise short-term lending (repo) and borrowing (reverse repo) rates in its September monetary review. After RBI raised its policy rates, the cost of funds for banks have incresed. However, SBI's rates are competitive as compared to other banks because it has access to a large base of low cost deposits called the current account savings account deposits or CASA.
Earlier this month, SBI hiked fixed deposit rates by up to 0.75 per cent. The bank raised deposit rates from 0.25-0.75 per cent across various maturities.
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