STATE BANK RAISES BASE RATE 10 BPS TO 7.60%

Striking a balance between wanting to attract more borrowers into its fold and the need to pass on the increased cost of mobilising resources, State Bank of India has nudged its base rate up by 10 basis points to 7.60 per cent. Simultaneously, its benchmark prime lending rate by 25 basis points to 12.50 per cent. Both the rate hikes are effective from October 21.

By upping its base rate only marginally at a time when other banks have raised their rates by as much as 50 basis points, SBI clearly wants to attract borrowers from other banks into its fold, say analysts.

Most public sector banks, including Punjab National Bank, Bank of Baroda, Union Bank of India, and IDBI Bank, have increased their rates from 8.00-8.25 per cent to 8.50 per cent after the Reserve Bank of India hiked key short-term interest rates in September.

Private sector banks such as ICICI Bank and Axis Bank have increased their base rate by 25 basis points to 7.75 per cent. HDFC Bank has raised its base rate by 25 basis points to 7.50 per cent.

With interest rates on deposits of various maturities being marked up by 25-75 basis points over the last few weeks, analysts say the increased cost of mopping up liabilities will pinch banks.

SOURCE: http://www.thehindubusinessline.com/2010/10/21/stories/2010102153110100.htm