Government-owned State Bank of India raised lending rates as liquidity in nation’s banking system shrinks to levels seen prior to the November 2016 note ban that had left lenders flush with funds.
SBI increased the loan rates across tenors by 10-25 basis points, the country's largest lender said in a notification on its website. The bank increased the one-year marginal cost lending rate by 20 basis points to 8.15 percent. Three-year MCLR has been raised to 8.35 percent from 8.1 percent earlier. The new rates are effective immediately. A basis point is one-hundredth of a percentage point.
SBI joined the league of other major lenders to increase lending rates in the last few weeks. Last month, HDFC Bank, IndusInd Bank and Axis Bank increased MCLR by 10-15 basis points. That’s because systemic liquidity has been in deficit mode and is now at levels seen before November 2016.
Banks have started looking at raising more funds by making deposits lucrative. On Wednesday, SBI had announced a hike in term deposit rates, citing tighter liquidity conditions and fading effects of demonetisation.
SBI increased term deposit rates by 10-75 basis points on deposits worth up to Rs 1 crore. While SBI had been increasing bulk deposit rates, this was the first time since November 2016 that it had increased retail term deposit rates.
Punjab National Bank and ICICI Bank on Thursday also increased rates after SBI’s move. The two lenders hiked their MCLRs by 15 basis points across tenors.