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Base rate for lending at 7.5%: SBI

State Bank of India expects most public and private banks to operate in a band of 7.5% to 8%

June 29, 2010 12:03 IST | India Infoline News Service

State Bank of India (SBI) has fixed the base rate for lending at 7.5%. Earlier, reports had suggested that the country's largest commercial bank could set the base rate at 8% or just below that. 


Reserve Bank of India, has directed all the Banks to switch over to the Base Rate system from the existing Benchmark Prime Lending Rates (BPLR) system w.e.f. July 1. Based on the deliberations in the ALCO (Asset Liability Management Committee) of the Bank, State Bank of India (SBI), has decided to fix its Base Rate at 7.50% p.a.  
 
All new loans sanctioned w.e.f July 1, and those falling due for renewal from July 1 , (except exempt categories as per RBI Guidelines) will now be priced with linkage to Base Rate.
 

SBI today said that it expects most public and private Banks to operate in a band of 7.5% to 8%


The Reserve Bank of India (RBI) has stipulated that all banks should arrive at a base rate for lending below which no loans can be extended. This has been done to curb the practice of retailers and small companies subsiding large companies.


Once the new rule comes into force on July 1, large corporates, who benefited from the so-called sub-prime lending rate (PLR) lending, will have to pay at least the base rate.


ICICI Bank plans to announce its base rate on Wednesday. “We will announce our base rate on June 30,” ICICI Bank managing director & chief executive Chanda Kochhar told reporters on Monday.


As per the new norms, existing customers will have to migrate to the base rate when their loan contract comes up for renewal. The new rule does not apply to finance companies, including mortgage finance firms. 


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