State Bank of India , india’s largest bank SBI, has raised deposit rates by 50 to 150 basis points giving an indication that lending rates are set to rise.Bank will now offer 8.50% for 555-days and 1,000-days deposit.
Reserve Bank of India (RBI) has told banks to price their loans as per the recent changes ,that their lending rates should factor in the increased or decreased cost of deposits.S Ranjan, deputy managing director, SBI said that “SBI has raised deposits rates would technically result in a hike in lending rates as well,”.
He further added that cost of deposits has gone up in the past few weeks which would be reflected in computing base rate ,the benchmark rate for pricing loans. SBI, along with all other banks, will be reviewing its base rate — at 7.60% last week. SBI will review its special home loan scheme where it charges a fix rate of 8% in the first year and 9% in the second and third year.
On Saturday, SBI chairman, OP Bhatt, had indicated that the bank will find it difficult to operate with lower net interest margins. “Lower NIMs will not be healthy for the banking sector,” he said.The new deposit rate will be effective from Tuesday (December 7). Among all slab, the sharpest hike is in 46 to 90-day slab where bank would offer 5.50% as against 4% earlier. In case of one year deposits, the bank will now offer 7.25% as against 6% earlier. Banking analysts feel that SBI would hike lending rates at least by 40 bps to protect its margins.
On Monday,government bonds hit a 26-month high yeild, with the yield on the 10-year benchmark touching 8.2%.
Banks continue to scrounge for liquidity and have been borrowings on an average Rs 1 lakh crore through RBI’s repo window every day. Liquidity is expected to tighten further as more money flows out of the system by way of advance tax payments from corporates to the government.
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