SBI hikes deposit rates by 25-75 bps, base rate unchanged

SBI hikes deposit rates by 25-75 bps, base rate unchanged

The country's largest lender State Bank of India (SBI) on Thursday said it will raise deposit rates by 25 to 75 basis points from Friday, but the bank has kept minimum rate of interest on loans unchanged at 7.50 per cent. 

"The bank revises upwards the deposit rates by 25-75 bps in various maturities, effective 1^st October, 2010," SBI said on Thursday in a filing to the Bombay Stock Exchange (BSE).

The various deposit rates of SBI are in the range of 4 per cent to 7.75 per cent.

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 per cent.

Thus, the base rate will continue to remain at 7.50 per cent 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 1^st July, 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 per cent 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.