SBI hikes deposit rates by 25-75 bps

India`s largest lender bank, the State Bank of India, on Thursday asserted it will raise its deposit rates by 25-75 bps from Friday. However, the base rate will remain unchanged, added the bank.

The country`s largest lender State Bank of India (SBI) Thursday said it will raise deposit rates by 25 to 75 basis points from tomorrow, but the bank has kept minimum rate of interest on loans unchanged at 7.50 percent.
"The bank revises upwards the deposit rates by 25-75 bps in various maturities, effective October 1, 2010," SBI said in a filing to the Bombay Stock Exchange (BSE).
The various deposit rates of SBI are in the range of 4 percent to 7.75 percent.

The bank added that it reviewed the base rate – the minimum lending rate below which bank cannot offer loans – at existing level of 7.50 percent. Thus, the base rate will continue to remain at 7.50 percent per annum for the present.

In order to bring in more transparency, base rate was introduced as a replacement of benchmark prime lending rate (BPLR) from July 1, 2010.

RBI in its first mid-quarterly review earlier this month had said, "One important consequence of negative real rates is that banks have seen a deceleration of deposit growth, as savers look for higher returns elsewhere. If bank credit is not to become a constraint to growth, real rates need to move in the direction of encouraging bank deposits."

Last month, SBI raised its benchmark lending rate by 50 basis points and deposit rates by up to 150 basis points.

While the increase in the BPLR to 12.25 percent made existing home, auto and corporate loans from the country`s biggest lender dearer, the hike in deposit rates ensured better returns for deposit-holders.