SBI hikes PLR by 50 bps
MUMBAI: The State Bank of India (SBI), the country's largest lender, has decided to increase its benchmark Prime Lending Rate (PLR) by 0.5 per cent to 11.5 per cent per annum with effect from Wednesday, the bank informed the Bombay Stock Exchange.
The PSU bank’s move follows many private sector banks which raised their lending rates after the central bank announced earlier this month it was increasing the proportion of deposits that banks were required to keep in cash.
However, SBI's benchmark is still lower than ICICI Bank, whose benchmark lending rate is now 13.75 per cent and HDFC Bank's at 13 per cent. Both banks raised their rates earlier this month.
The central bank has used various measures this year to contain inflationary pressures due to high oil and food prices, including increasing its main short-term interest rates.
On December 8, it changed tack and opted to increase the cash requirement in two 25-basis point stages, on Dec. 23 and Jan. 6, as a way of targeting surplus funds in the banking system.
Banks have gradually raised deposit and lending rates in the course of the year, although they have not acted every time the central bank has tightened policy and much cash has poured into the booming stock and property markets.
The lending rate increase is also due to the rising cost of funds for banks, which are paying more for deposits as a way of encouraging investors to save with them rather than putting their money into the stock market.