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SBI Raises Lending Rates By 50 BPs

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Country's largest bank SBI on Friday raised lending rates by 50 basis points, making its home, auto and corporate loans costlier.

The bank revised the base rate, or the minimum lending rate, upwards by 50 basis points from 9.50 per cent to 10 per cent, effective from August 13, State Bank of India (SBI) said in a statement.

The benchmark prime lending rate (BPLR) also goes up by similar percentage points to 14.75 per cent, making loans for existing borrowers dearer by at least 50 basis points.

Following the Reserve Bank's decision to raise short-term key rates in its first quarter review of monetary policy last month, lenders have responded by increasing interest rates.

Over two dozen banks, including Punjab National Bank, Bank of Baroda, Oriental Bank of Commerce have raised interest rates.

The RBI had raised the short-term lending (repo) rate by 50 basis points to 8 per cent and the short-term borrowing (reverse repo) rate by a same margin to 7 per cent. The central bank had hiked key policy rates 11 times since March 2010 in its bid to tame inflation.

Subsequently, the interest rate under the Marginal Standing Facility, an additional borrowing window, has gone up to 9 per cent from the earlier level of 8.5 per cent.

Since the nationalisation of banks in 1969, Meena said 35 bank mergers have taken place in the country involving public and private sector banks.

Out of 35 mergers, he said, 25 private banks were merged with public sector banks, two state-owned banks were merged with PSU banks and eight private sector banks were taken over by other private sector banks.

The mergers of two subsidiary banks with the SBI, the Minister said, have benefited the employees.

On rising non-performing assets (NPAs), the Minister said, the government and the Reserve Bank have given directive to the banks to take all steps to reduce them.

Factors like global crisis and bad monsoon, he said were responsible for rising NPAs in the banking sector in the last two years. Gross NPAs of the banks was less than 3 per cent of their assets, he said.

Earlier, Nishikant Dubey (BJP) supported the bill but asked the government to introspect and rethink over the economic and financial policies.

He alleged that Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee and Deputy Chairman Planning Commission Montek Singh Ahluwalia were formulating the policies by just seeing books, which was "disastrous" for India.

There is a perception that the model of reforms was increasing poverty, he said.

Among others who spoke were B Mahtab (BJD), Shailendra Kumar (SP), Prabodh Panda (CPI), Raghuvansh Prasad Singh (RJD), A Sampath (CPM), Mangani Lal Mandal (JDU) and Prasanta Kumar Majumdar (RSP).