SBI increases home loan rates

Home loans and auto financing from public sector State Bank of India would be dearer as the lender has decided to hike interest rates by 50 basis points on all credit linked to Prime Lending Rates.

Speaking at a function here on Monday, State Bank Chairman-cum-Managing Director O P Bhatt said the bank has decided to raise the interest rate by 0.5 percent on all loans such as home loans and auto loans which are linked to PLR.

The revision in PLR came after SBI raised its PLR from 12.25 percent to 12.75 percent last week following Reserve Bank's increasing its key short-term lending rate to banks and the mandatory cash deposits that banks need to keep with the apex bank (CRR) by 0.5 percent each.

Referring to the impact on bank's profit margins, Bhatt he hoped to maintain the net interest margin at 3 percent this fiscal.

SBI had earlier announced to hike interest rate on fixed deposit rates by up to 75 basis points effective from June 30.

State Bank of India in which government has about 60 percent stake is targeting 40 percent growth in non-interest income in 2008-09, compared to 28 percent last fiscal.

The bank had lowered its PLR twice in February to 12.25 percent but decided to raise by 50 basis points last week.

"The net profit of the bank is likely to be affected next quarter though there is not much on first quarter profits ending today," he said.

He also indicated the bank is expected to set aside at least USD 10 billion to provide for depreciation in its treasury portfolio as interest rate rise.