State Bank of India has reset the rules of the game. On Tuesday it announced a new base rate of seven point five percent. That’s going to come into effect from 1 July. The base rate is the lowest rate at which a bank can lend money. State Bank of India’s move came after the RBI made it compulsory for banks to set minimum rates by 1 July. The RBI is hoping the new regime will bring in more transparency into the lending system.
Some public sector banks have already followed State Bank of India’s lead and announced their base rates. Punjab National Bank, Indian Bank and Bank of Baroda all fixed their minimum rates at 8%.
In other news, Prime Minister Manmohan Singh has reaffirmed his commitment to reforming fuel price structures. On Tuesday Singh said diesel prices would be freed up soon, just like petrol prices. Last Friday the government deregulated prices of petrol and increased those of other fuels including diesel and kerosene.
Manmohan Singh’s statement comes at a time when some members of the ruling Congress party are privately urging a roll back of fuel price hikes. The party faces elections in Bihar later this year and more polls in Bengal, Assam and Kerala in 2011.