SBI hikes rates 3rd time
April 19: India’s largest lender, State Bank of India, revised its lending rates up by a quarter percentage point on Tuesday. The public sector lender has raised the base rate — the lowest rate at which it can offer loans, and the prime lending rate. This means all the loans where interest rates are pegged to these two will also go up. However, a bank official said that a final decision on raising interest rates on home loans has yet to be taken. Usually however, changes in base rate and PLR are also accompanied by changes in rates of these loans as well.
This is the third hike in base rate by State Bank of India so far this year. It had earlier hiked the base rate in January and February, by 0.25 per cent and 0.40 per cent respectively. Some more rate hikes may be possible in the coming months as the Reserve Bank of India (RBI) is expected to hike policy rates further to clamp down on inflation. Most economists expect the RBI to hike policy rates by a quarter per cent in the next credit policy, due to be announced on May 3. While rate hikes by RBI don’t immediately lead to interest rate hikes by banks, they do create upward pressure on rates.
If interest rates on home loans are hiked by a quarter per cent, then a Rs 20 lakh home loan of 20 years duration will see the equal monthly installment (EMI) increase by Rs 340 a month. From October last year to now, State Bank of India has raised its base rate by a full percentage point. This means the EMI on the above loan would be higher by Rs 1,300-Rs 1,400 a month. Inspite of the rate hikes however, State Bank of India still remains the best bet for borrowers as it has the lowest base rate amongst all the major banks.
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