Loans to get costlier as PSU’s increased their base lending rate

State Bank of India (SBI), the country’s largest banking player on Monday beefed up its benchmark lending rate by 50 basis points to 12.25%.

This increase in the base lending rate by the SBI signals the dripping down of the Reserve Bank’s policy of tight money.

State Bank, which along with its associates control a quarter of bank loans and deposits in India, said it was raising its benchmark prime lending rate (BPLR) 50 basis points to 12.25% effective from 17th of August 2010.

This will make home, vehicle and corporate loans to existing customers costlier. However, for new borrowers the base rate, which became effective from 1 July this year, stands at 7.5 per cent.

SBI also raised its fixed deposit rates by up to 150 basis points across various maturities.

The decision comes days after RBI increased its key rates to control rising prices.

The Reserve Bank of India has increased its main short-term lending rate by 100 basis points since mid-March and the borrowing rate by 125 points, to curb inflation that has stayed in double-digits for 5 months.

Meanwhile, other public sector banks (PSU) have also revised their money lending and deposit rates. Punjab National Bank, the country’s second largest lender, has increased its benchmark prime lending rate by 75 basis points. This is the sharpest increase among all lenders.

Bank of Baroda, Corporation Bank and Oriental Bank of Commerce have also increased their standard lending rates by 50 basis points.