State Bank of India raised deposit and lending rates steeper than rivals, which may push up cost of funds across industry as well as for borrowers. The bank’s profitability, which is already under pressure due to rising interest rates in the last few months, may get eroded further as it will pay more for funds. The bank raised its benchmark prime lending rate 75 basis points to 14%, and the base rate below which it will not lend to anyone by the same amount to 9.25%.
Deposit rates on shorter tenors were raised as much as 225 basis points. A 14-day deposit at SBI will return 6.25%, against 4% earlier, while one-year returns remain at 8.25%. New rates are effective May 12. SBI joins ICICI Bank and the rest in raising rates after the Reserve Bank of India increased policy rates by 50 basis points to 7.25% on May 3. The RBI’s objective of raising rates for the past one year to keep prices under check may at last be yielding results with banks passing on the higher costs to customers. crackcrack
