SBI, PNB hike interest rates; home, auto loans to be costlier

State Bank of India steeply hikes deposit rates for various tenure

The one-year marginal cost of funds based lending rate (MCLR) was earlier at 8.15 per cent. Typically, retail loans - particularly home loans - are linked to one-year MCLR, which SBI has now increased by 20 basis points (bps) to 8.15 per cent from 7.95 per cent.

The six-month MCLR by 10 basis points to 8%, while the three-year loan pricing goes up by 25 basis points to 8.35%.

For the two- and three-year tenure, the rates were increased to 8.25 percent (from 8.05 percent) and 8.35 percent (from 8.10 percent), respectively.

Defending the hike that will hurt all borrowers, especially the individual borrowers the most, SBI said "in the past one month, liquidity situation, which used to be in surplus has become neutral or maybe in a minor deficit mode". The banks have no option but to raise lending rates to insulate their profitability against the provisioning of bad loans.

For deposits of 180 days to 210 days maturity, SBI now offers 6.35 per cent against 6.25 per cent earlier.

The new benchmark rate will be effective from March 1, 2018, the bank said through a notification. The deposits by up to 50 and 75 bases (100bps = 1 percentage point). Their decision also signals a turn in the interest rate cycle.

Indeed, one member of RBI's monetary policy committee (MPC) said a series of rate hikes may be warranted because of rising risks to inflation, while others hinted at a change in policy stance if those risks materialize, show minutes of the February meeting released on Wednesday.

Following SBI, ICICI too raised its overnight MCLR by 15bps and one-year MCLR by 10bps, while Punjab National Bank (PNB) hiked its one-year MCLR by 15bps.

For senior citizens, the rate on deposits for two years or more has been increased to 7 per cent from 6.5 per cent earlier. The SBI FD Interest rates hike is especially helpful for the retired people. Banks charge a spread over this MCLR while giving loans to borrowers.

PNB also increased its retail and bulk term deposits by up to 45 basis points on Thursday.

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