India’s largest bank, the State Bank of India (SBI) on Monday has announced to hike its benchmark Prime Lending Rate (PLR) - the rate on which banks disburse long-term loan- by 100 basis points (bps) while it has also announced to hike deposit rates on fixed deposits (FDs) ranging 0.25%-0.75% according to deposit terms.
Releasing a statement, the PSUs bank icon has raised the PLR, which is applied on home loans, auto loans and educational loans. On home loans, the interest rate has been increased by 1 percent from the existing 12.75%, while on auto loans; SBI has raised the interest rate by only 0.50%. However, bank has announced that it would not affect the existing home loan borrowers up to Rs.30-lakh credits as well as existing auto and educational borrowers.
For the new home loan borrowers, the borrowing will now be more pinching as the creditors will have to pay Rs. 59 more on Equal Monthly Installment (EMI) of per one lakh amount for the tenure of 10-year credits at fixed interest rate and while for floating interest rate, it will to pay more Rs. 69 EMI on EMI of same 1,00,000 amount for the tenure of 20-years.
This means, the customers, who opt for home loans of Rs. 20 lakh in a five-year tenor, will have to pay Rs. 43,236 as against Rs.42,249 on the floating rate of interest mode while at the fixed rate mode the EMI on the same amount for the same tenure would now have to pay Rs.43,775 as against Rs.42,741.
Same on the educational loan, the existing interest rate on education loan up to Rs 4 lakh is 12.25% and that on above Rs 4 lakh to Rs.7.5 lakh is around 13.75% while above Rs.7.5 lakh, the interest rate was 12.75. Now, one percent of interest rate will be add on all sorts of rate.
For the automobile buyers, a good news for the existing creditors but bad news for those who are thinking to buy new vehicles. Now, they have to pay more a range of Rs. 48 to 81 depending upon the tenure of the loan for per one lakh rupees.
On the other hand, on the term-end deposits, SBI has enhanced the FDs rates on all term deposits. For tenure of 91 to 180 days has been revised to 7.5 per cent from 7 per cent, deposits of 181 to less than one year will now be paid around 8.50 per cent (8 per cent). The interest rate on deposits of 1 year to less than 2 years has been raised to 10 per cent from 9.5 per cent earlier, while sharpest hike came in the tenure of three years to less than five years where the revised interest rate stands at 9.75 per cent against 9 per cent earlier.
SBI in the term deposit rate has been revised rate second time since June 27 while it has increased PLR by 150 basis points during 2008-09.
The rise in PLR has been effective since August 12 while FD rate will be effective from August 16, 2008.
It is likely that other PSU banks may follow the path of SBI, meanwhile, Punjab National Bank (PNB) and Bank of Baroda (BoB) has already hiked the home loan rate by 100 bps and 75 bps respectively. The new home loan interest rate of both the banks is 14%.
Major private sector banks, ICICI and HDFC have hiked the home loan in July viewing the Reserve Bank of India’s quarterly credit policy review in which the apex bank has hiked the Cash Reserve Ratio (CRR) – the slice of cash banks park in the Central bank- by 25 bps and repo rate – the rate on which RBI lends short term loans to banks- by 50 bps. Both are now at 9%.
Since April, the central bank has increased the repo rate by 125 basis points and the CRR by 150 basis points.
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