Mumbai: State Bank of India (SBI), the country’s biggest lender, may decide Thursday on further increases in lending rates to pass on the burden of the rising cost of funds to customers.
The state-run bank’s asset liability committee (ALCO) is meeting today on this issue, according to people familiar with the development.
The lender is contemplating a rise in the lending rate by at least 25 basis points (bps) with a view to protecting its margins to offset the impact of successive rate hikes by the Reserve Bank of India (RBI). One bps is one hundredth of a percentage point.
To contain inflation, the RBI has raised its key policy rates 11 times since March 2010, from 3.25% to 8%, thereby giving a signal to banks to increase lending rates and curb demand in the system.
Since July 2010, most Indian banks have raised loan rates by 225 bps.
SBI last raised rates on 11 July when the base rate, or the minimum lending rate, was increased by 25 bps to 9.5%. The benchmark prime lending rate was lifted by a similar amount to 14.25%.
SBI has also raised savings deposit rates by 1 percentage point across all maturities.
ICICI Bank Ltd, the largest private lender, raised its base rate by 25 bps in July to 9.5%. The lender also increased its BPLR to 18.25%.