State Bank Prime Rate Up 100bp

State Bank of India (SBI) yesterday increased its prime lending rate (PLR) 100 basis points to 14 per cent, signalling a hike by other public sector banks. SBI also hiked its medium term lending rate (MTLR) from 12.75 per cent to 13.5 per cent.

Among foreign banks, ANZ Grindlays Bank hiked its PLR 150 basis points to 16 per cent and its medium term PLR from 13 per cent to 14 per cent. Even the new private sector banks like Centurion Bank and IndusInd Bank hiked their PLRs 50 basis points to 15 per cent and 200 basis points to 16 per cent, respectively.

 

ANZ Grindlays, IndusInd Bank and Centurion Bank also hiked their domestic term deposit rates. Central Bank, too, hiked its deposit rates. Last Friday, IDBI Bank had raised its deposit rates.

While SBI has raised its lending rates and deposit rates, other public sector banks including Bank of Baroda, Bank of India, Corporation Bank, Dena Bank and Union Bank of India are expected to revise their rates this week. The management committee of the Indian Banks Association is meeting today and many banks will take a decision on the interest rates after that. It is understood that many loss-making banks want to hike their PLRs by 200 basis points but are unable to do so due to SBI.

Industrial Development Bank of India will take a decision on revising its lending rates and deposit rates today while Industrial Credit and Investment Corporation of India Ltd is expected to announce its revised rates on Thursday.

Most bankers said the hikes in lending and deposits rates were short-term. According to Bank of Baroda CMD K Kannan, The rise in interest rates is short-term in nature and things will cool in a few months. The call rates are expected to stabilise in a weeks time.

The short-term nature of the rate hikes is evident from the fact that both Central Bank and IndusInd Bank have left their long-term deposit rates untouched and only hiked the short term rates. Says Rajiv Butalia, vice-president, IndusInd Bank, We have not hiked the deposit rates for the long end as we feel rates will fall soon and dont want to get locked into high cost funds for long tenures.

Says R S Hugar, chairman and managing director, Corporation Bank, We will hike the lending and deposit rates soon in line with SBI. But I do not believe that rates will stay high for a very long time. According to Kalpana Morparia, general manager, ICICI, The costing of our loans depends on the pricing of our liabilities. We are looking at how the liability costs move and will decide on our lending rates by the end of this week.

SBIs MTLR is a mark-up over the bank rate. Earlier, SBI had fixed the mark-up over the bank rate at 3.75 per cent but it now stands reduced to 2.5 per cent. SBI has retained the maximum spread over MTPR at 3.5 per cent.

SBI has hiked its domestic term deposit rates across all maturities. The interest rate on 30-90 day deposits has been hiked from 5 per cent to 6 per cent, that on 91-179 day deposits by 50 basis points to 7 per cent and that on 180 days to less than one year to 8.5 per cent from 7.5 per cent

SBI, which had on Friday revised the interest rate on FCNR(B) deposits downwards, jacked up the interest rates on NRE and NRNR deposits. Bank of Baroda has revised its deposit rates on non resident deposits.

Central Bank officials said they would be taking a decision on revising the lending rate upwards shortly. Central Bank has hiked the interest rates on deposits of 46-179 days from 6 per cent to 7 per cent, and on deposits of 180 days to one year from 7.5 per cent to 8 per cent. The bank has decided not to hike rates on term deposits with a maturity of 30-45 days and deposits with a maturity of over one year.

IndusInd has hiked the interest rate on deposits between 30 and 90 days two percentage points to 10 per cent.

The rate on 91-364 day deposits has been raised three percentage points to 11 per cent and the rate on one year-18 month deposits two percentage point to 12 per cent. The deposit rate for 18 month-three year deposits is up to 12 per cent from 11 per cent while the three-year rate stays at 12 per cent.

ANZ Grindlays Banks domestic term deposit rates have been increased from 7.5 per cent to nine per cent for 30-90 days; from 8.5 per cent to 10 per cent for 90 days-one year and to 11 per cent for one year to five years.