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SBI to review deposit, lending rates

August 12, 2010 19:35 IST

MoneyState Bank of India said on Thursday it will take a call on hiking deposit rates and lending rates for existing borrowers by at least 25 basis points.

"There is an upward bias on interest rates . . . on the both deposit and lending rates. We will review deposit rates and benchmark prime lending rate," SBI chairman O P Bhatt told reporters in Mumbai while announcing the first quarter results of the bank.

Asked about the quantum of the likely hike, Bhatt said, "It has to be minimum 25 basis points."

He, however, did not say when the bank would review the rates.

"The deposit rates have almost bottomed out for the industry and there is definitely an upward bias as far as advances are concerned because of the way the RBI is managing the inflation and liquidity," he added.

Most of the public sector lenders, including Punjab National Bank, Bank of Baroda and Canara Bank, have hiked their lending rates after the Reserve Bank of India increased its short-term lending (repo) and borrowing (reverse-repo) rates by up to 50 basis points on July 27.

RBI, however, kept the cash reserve ratio, the portion of deposits banks are required to keep with the central bank in cash, unchanged due to the difficult liquidity position in the markets.

The central bank took these measures to tame inflation, which is in double digits for the last few months.

Some of the leading banks like ICICI Bank, Punjab National Bank, Union Bank of India, Oriental Bank and HDFC Bank have also raised their deposit rates.

Bhatt also said that the bank is planning to raise Rs 20,000 crore (Rs 200 billion) from rights issue this fiscal.

If rights issue does not happen, options are also open for raising the fund through preferential issue and follow-on offer, he added.

He expects the bank's credit growth at 21-22 per cent for the current fiscal.

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