SBI hikes lending rates by 25 bps, loans to become costlier

The country's largest lender SBI on Tuesday announced a hike of 25 basis points in lending rates, making loans more expensive for existing and new borrowers.

The bank has revised the base rate upwards by 25 basis points (bps), or 0.25%, to 8.50% effective from April 25, State Bank of India (SBI) said in a statement.

The SBI's announcement comes a month after the Reserve Bank raised its lending and borrowing rates by 25 basis points each to 6.75% and 5.75% respectively.

Also, the central bank is widely expected to hike key policy rates by at least 25 basis points in its annual monetary policy on May 3.

SBI's base rate is still the lowest among that of public sector banks which have set their base rates at around 9%. The base rate of the largest private sector lender ICICI Bank is 8.75%. Base rate is the lowest rate below which a bank cannot lend to any one.

SBI has also increased its Benchmark Prime Lending Rate (BPLR) by 25 basis points which would mean the existing borrowers also have to pay more for their loans.

With this, BPLR would go up to 13.25%. This will make EMIs for the existing loans dearer by at least 25 basis points.

The bank last revised both the rates in February this year.

SBI, however, has left deposit rates unchanged at current levels even when some of the public sector and private sector banks reduced rates on select maturities during the month.

UCO Bank, Central Bank of India, Oriental Bank of Commerce and Dhanalaxmi Bank slashed their deposit rates during the month.

To bring in more transparency, the base rate was introduced replacing the Benchmark Prime Lending Rate (BPLR) in July, last year.

The BPLR is used for determining interest rates on loans and advances sanctioned up to June 30, 2010.