The largest lender in the country, State Bank of India, on Wednesday slightly raised the short-term loan rates for maturities ranging from overnight to three years by 10 basis points (bps), effective immediately.
The Reserve Bank has raised interest rates by 250 basis points since last May, and the banks have almost entirely passed those increases along to customers. However, they have not yet increased deposit rates in a corresponding manner, creating a funding gap that has forced banks to borrow from the market.
For the two weeks ended January 13, loan growth increased 16.5% annually compared to deposits’ 10.6% rise.
According to the SBI website, the bank raised its overnight lending rate, which is based on the marginal cost of funds, by 10 basis points to 7.95%, while also raising the rate for loans with one- and three-month maturities to 8.10%.
The bank was charging 8.30% for a six-month loan before the hike, which is now 8.40%; 8.40% for a one-year loan before the increase is now 10 bps more expensive; 8.60% for a two-year loan; and 8.70% for a three-year loan after the revision. The retail borrowers of home and vehicle loans won’t be impacted by the rate increase because these loans have long terms.
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