Existing home loans from the State Bank of India (SBI), the country’s largest lender, will get marginally expensive with the bank increasing its base rate to 8.70%, up 5 basis points (bps), from 8.65%, in what analysts see as a first sign of gradually hardening interest rates.
A basis point is one-hundredth of a percentage point.
This is the first increase in the base rate in the last five years.
The bank has also increased its benchmark prime lending rate (BPLR) by 5 bps to 13.45% from 13.40%.
The last rate increase in both base rate and BPLR happened in 2013.
SBI attributes the base rate hike to the increase in term deposit rates.
“The marginal increase in base rate is due to the upward movement in term deposit rates.
As the cost of deposits goes up, it reflects on the base rate as well,” said PK Gupta, managing director, SBI.
Last week, SBI increased 2-10 year retail term deposit rates by 10-25 bps due to tight liquidity (shortage of cash) in the banking system.
This was the second hike in deposit rate in the past one month
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