SBI TO INCREASE ITS BENCHMARK LENDING RATES


On Aug 16 .In a decision taken by SBI, raised the benchmark lending rate by 50 basis points to 12.25 percent. As a result of this rise, the home, vehicle and other corporate loans are destined to become costlier to existing borrowers. As a few days ago the Reserve Bank of India had increased its key rates to control rising prices. A leading trade and Industry Chamber Thursday said the State Bank of India (SBI) was forced to rethink its decision on tractor loans after political intervention, which it described as an unhealthy practice, ”It seemed that the SBI came under heavy political pressure from various quarters ,including bureaucracy Which forced it to withdraw the circular which is not a healthy practice in a vibrant democracy like that of India,” said Venogopal N.Dhoot. President of the Associated Chambers of Commerce and Industry of India (Assocham). According to Dhoot, most farmers will not adhere to their loan, repayment schedule and ultimately would mount a pressure on the government for a waiver of their loans for buying tractors And other farming equipment. SBI, besides raising lending rates, has also increased returns on term deposits and has introduced a floating rate deposit scheme to attract investors in a rising rate regime. The impact of RBI’s hike in repo and reverse repo rates is being felt earlier than expected with the central bank keeping liquidity on a tight leash. For SBI, this is the first lending rate hike after the RBI began raising policy rates since February this year. SBI has not revised its base-rate—the new cost – plus pricing mechanism effective from July 1, which continues to stand at 7.50%.SBI will offer floating rate deposits where interest rates on deposits of one year, three and five years will be linked SBI’s base rate (7.50%). When RBI has warned of further rate hikes and there is a general expectations that deposit rates will continue to rise. (Aug 29) Bank lending is expected to grow 20-25 percent this year on account of the government’s increased focus on infrastructure, higher capital needs of companies and strong retail demand. SBI, the largest public sector bank in India, has made home loan, car loan & other corporate loans more costlier for its existing borrowers by increasing benchmark lending rate (BLR) by 50 basis points to 12.25 per cent.

In case of fixed deposits, SBI increased interest rates by 1.5 per cent to 4 per cent per annum for the term deposit with maturity between 15 to 45 days. This is the most increase done by the SBI compared to other maturity term deposits.Following the monetary action, most of the public sector lenders, including Punjab National Bank,Bank of Baroda, Bank of India, Oriental Bank of Commerce and Canara Bank, responded by raisng their BPLRs by up to 50 basis points. At the same time, many banks have increased deposit rates.


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