The Hindu Business Line : SBI hikes prime lending rate; all loans to cost more

Impact on margins
Despite the latest increase, the gap between PLRs of SBI and its private sector counterparts remains wide
"Since there is a huge gap between the PLRs of public sector and private banks, there will be a bigger impact on the margins of public sector banks," said a banking analyst

Mumbai April 7 All loans, including existing home loans, offered by State Bank of India will be priced higher from Monday. This follows the 0.5 percentage point increase in the benchmark Prime Lending Rate (PLR) announced by the bank on Saturday.

The benchmark PLR (referred to as SBAR) has been revised upwards to 12.75 per cent from 12.25 per cent per annum, effective April 9.

Although the mark up in rates by SBI follows others such as ICICI Bank, HDFC and Bank of Baroda, the quantum of the increase has been lower than its peers, who have marked up their rates by 75 to 100 basis points.

"A hike of 50 basis points is good enough for us to maintain our margins. With this hike, we could see a slow down in credit growth from the current 26 per cent to around 22 per cent," said a senior SBI official. "SBI cannot be seen profiteering from a rate hike," he added.

The bank's total outstanding advances stand at around Rs 3,30,000 crore.

An official said that the 50 basis point hike will be applicable to all loans, including the existing floating rate home loans.

The floating rate stands revised at 10.75 per cent for new loans with a tenor of up to five years. And the revised fixed rate for 10-year loans stands at 12.75 per cent.

The SBI's home loan portfolio is around Rs 38,000 crore.

The bank has also decided to extend the deposit schemes that offer the highest interest rates beyond March 31. It offers an interest rate of 9.5 per cent on four to five year deposits and 9.25 per cent for three-year deposits.

SBI had last raised its PLR in February by 75 basis points to 12.25 per cent.

According to a bank source, the asset liability committee of SBI on Thursday had suggested a higher dose of 0.75 percentage increase in the PLR, exempting housing and education loans below Rs 15 lakh and Rs 4 lakh, respectively. However, the bank's board on Saturday decided to hike the PLR by 0.5 percentage point, but with no exemptions.

Despite the latest increase, the gap between PLRs of SBI and its private sector counterparts remains wide. ICICI Bank has hiked its benchmark advance rate to 15.75 per cent, while HDFC Bank has pushed it up to 15 per cent.

Bank of Baroda was the first public sector bank to hike its PLR on Thursday by 75 basis points to 13.25 per cent. "Since there is a huge gap between the PLRs of public sector and private banks, there will be a bigger impact on the margins of public sector banks," said a banking analyst.

Banks have hiked interest rates tracking the RBI's mark up of the repo rate and the Cash Reserve Ratio on March 30. Analysts estimate that RBI's hikes would shave off over Rs 1,600 crore of banks' revenues.

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