State Bank to hike loan rates by 0.75%

The country's largest lender, the State Bank of India (SBI) today said it will shortly raise car and other personal loan rates, excluding housing and education, by an average of 0.75%.

"We have announced hike in benchmark prime lending rates by 75 basis points (bps)...Consequently, we will be raising rates of all (personal) loans, except for housing and education, by 75 basis points on an average," Yogesh Agarwal, managing director, SBI said on the sidelines of the launch of electronic system for excise and service taxes.

He, however, clarified that some loan rates may rise by 1% and some by 0.50%, but the average would be 0.75%. The interest rate hike would be announced in a few days, he added.

Agarwal's statement came amid reports that ICICI and Kotak are increasing auto interest rates by 0.75 to 1% this weekend.

Pursuant to increase in cash reserve ratio by the Reserve Bank, SBI had announced 0.75% in its benchmark prime lending rate to 12.25% last month.

However, all the existing housing and educational loans as well as new educational loans up to Rs 4 lakh are excluded from the hike. Similarly, all the existing and future agriculture production loans less than Rs 3 lakh are excluded from its impact.

SBI had also raised interest rates on some of its deposit schemes.

Agarwal said hardening interest rate cycle has peaked in the economy and the rates are likely to stabilise at these levels. "Usually, interest rates rise towards the end of year and stabilise at the beginning of the year because of slack season," he said.