State Bank of India on Friday hiked its lending and deposit rates by 25 basis points. The bank has hiked its base rate and benchmark prime lending rate (BPLR) by 25 basis points to 8.25% and 13%, respectively. It has also hiked interest rates on deposit by 25 basis points across maturities. The bank last hiked its lending rates on December 31, 2010.
Talking to FE a senior SBI official said that there would be a marginal impact on the bank’s net interest margin (NIM) by 1 or 2 bps only as the bank raised deposit rates in the two of its most popular term deposits.
The bank’s NIM as on December 31 was at 3.4%. The impact on the cost of fund of the bank would also be a marginal, may be by 2 bps as the current fiscal year was on the verge of closure. The bank was maintaining its credit deposit ratio at 74%. The official added that the deposit growth of the bank was constantly improving and it would itself take care of the moderation in bank’s credit growth.
?It?s unlikely that a 25 basis points hike should impact credit offtake,? said the bank?s senior executive.
Meanwhile, SBI expected 19% credit growth this financial year. “Credit growth will take between 18% and 19% in the current fiscal,” SBI managing director R Sridharan told reporters on the sidelines of a Ficci meet on Friday.
Compared to other banks in the public sector, SBI has one of the lowest loan rates, which makes PSU banks a tad concerned about credit growth.
Bank of Baroda, ED, RK Bakshi, executive director, ?The recent round of rate hikes could act as a dampener and affect credit growth in the long run . Overall credit growth would also slowdown to around 20% or lower because of the base effect. As in the March quarter last year, we had seen a bumper growth in credit. However, this is not a concern as the Reserve Bank of India is worried about the deposit growth not keeping pace with the growth in credit.”
Meanwhile, credit offtake continues to remain fairly strong. For the fortnight ended January 28, 2011, the increase in non-food credit has been 23.1% year-on-year, at Rs 37,85,998.62 crore. This is line with the year-on-year growth seen in the previous fortnight though a tad lower than the increase seen in the fortnight ended December 31, 2010.
The latest round of rate hikes was kicked off by Punjab National Bank on January 31. Since then more than half a dozen banks have made money more expensive. Many others like Kotak Mahindra Bank have raised rates on deposits. HDFC Bank had recently hiked its auto loan rates by 50 bps.