SBI sets base rate at 7.5%

Country's largest public sector lender State Bank of India today fixed its benchmark lending rate at 7.5 per cent following a Reserve Bank directive, a move that will end the practice of sub-prime loan to corporates.

The rate will come into effect from July 1.

"State Bank of India has fixed the base rate at 7.50 per annum with effect from July 1, 2010," the bank said in a regulatory filing to the Bombay Stock Exchange.

Private banks and other lenders are also likely to peg their base rate closer to that of SBI to stay competitive in the corporate loan market.

Sub-prime loan offers lower than market rate to companies with high credit worthiness.

The Reserve Bank has set July 1 as the date from which the base rate regime (for lending) will come into effect.

Through the base rate regime, the RBI seeks to make banks stick to a declared lending rate, below which no bank can lend, with a view to bring about more transparency in the lending regime.

Shares of State Bank of India were trading at Rs 2,309 on the BSE, up 0.31 per cent from the previous close.