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| Loan rates to pinch this festive season |
| BS Reporter / Mumbai Sep 18, 2011, 00:42 IST |
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State Bank of India to pass on policy rate hike to consumers in two-three weeks.
A day after the Reserve Bank of India raised the key policy rate by 25 basis points the country’s largest lender State Bank of India (SBI) said it will pass on the increase to consumers in two-three weeks by increasing its base rate.
 “The rate hike will be passed on in another two-three weeks. If the input cost goes up, you have to increase the output cost also,” Pratip Chaudhuri, chairman of SBI, said on Saturday. The base rate of SBI is at 10 per cent, while most public sector banks have a base rate of 10.75.
Another government-owned lender Bank of Maharashtra said it will raise its base rate from October 1. “We will pass on the rate hike to customers from the next month since we had not hiked the rates last time,” A S Bhattacharya, chairman and managing director, Bank of Maharashtra, said.
Banks have been raising their base rate – the benchmark rate for all loans – following RBI’s rate signals. According to the central bank, monetary transmission strengthened with 45 banks raising their base rates by 25-100 basis points (bps) after the first quarter review of the monetary policy in July. The policy rate was increased by 50 bps then.
“Consequently, the model base rate of banks rose to 10.75 per cent in August from 10.25 per cent in July,” RBI said in the mid-quarter review announced on Friday.
SBI also said it will not offer any products in the festive season unlike some of its competitors. Some of the banks are offering special loan and deposit schemes to attract customers in the festive season.
Chaudhuri added the bank had seen a fall in home loan demand due to high property prices. “There is a fall in home loan demand because of saturation and people are expecting the prices to fall. They are not in a hurry to buy now.”
The SBI chairman expressed concern about the capital goods sector which posted a negative growth in July. Capital goods output contracted 15.2 per cent in July and led to a meagre growth of 3.3 per cent of the Index of Industrial Production (IIP). In June it grew 8.8 per cent.
“We are worried about the capital goods sector because it is reeling from slowdown and has shown a negative trend because they are not able to compete with imported equipment,” Chaudhuri said.
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