State Bank of India hints at rate hikes

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The nation's largest lender State Bank of India (SBI) on Thursday hinted at increasing both its lending as well as deposit rates following the recent 50 basis points tightening by the Reserve Bank of India (RBI).

"We will have to transmit whatever the RBI had tightened recently to the customers, both in our lending as well as deposit rates," chairman Pratip Chaudhuri told reporters after attending a board meeting of the Reserve Bank here. But he did not say how much will be transmission effect.

Meanwhile, it has been learnt that SBI will hold its asset liability committee (Alco) meeting this evening to finalise its rate hike move.

On the much-delayed Rs21,000-crore rights issue, the chairman said the bank has sought Rs5,000-15,000 crore from the government as its share of the proposed rights issue. Again he did not offer a time-frame for the issue.

Since last fiscal, the bank has been working towards getting its rights issue rolling as the bank badly needs to ramp up its capital base to fuel its growth.

However, observers are not sure whether the government will allow the issue this year, as it will have to subscribe to a little over 59 per cent of the issue going by the equity holding of the bank. The government owns a tad over 59 per cent in SBI. And considering the precarious position of the government finances, analysts say, North Block will not allow the bank to go ahead with the issue this fiscal.

On July 26 at the first quarter policy review, the monetary authority had increased its key lending and borrowing rates by a steep 50 bps, stocking the markets and the industry alike, and hinted that its main focus would be managing inflation even at the cost of sacrificing growth in the short-term.

Following this, all almost all the banks, barring the major three ones -- SBI, ICICI and HDFC Bank -- have increased their lending rates in the range of 25-100 bps.