Top banks hikes interest rates on Deposits and Loans

SBI squeeze deposit rate, PNB hikes both loan, and deposit rates Interest rates are on their way up. Leading the way this time around is Delhi-headquartered Punjab National Bank (PNB), which on Thursday increased its base rate (the minimum rate at which any bank lends) to 8.5% from 8%. The bank also increased rates on deposits of various maturities by between 25 to 50 basis points (see chart). One basis point is a hundredth of a percentage point. The revised rates will come into effect from October 1. With the latest revision, the peak deposit rates will now be 8% for the maturity bracket of 8 to 10 years. "Keeping in mind the concern shown by RBI (Reserve Bank of India) on negative real rates to savers, PNB has decided to raise interest rates on domestic term deposits in select buckets," the bank said in a statement. State Bank of India (SBI), the country's largest bank, has also increased deposit rates by between 25 and 75 basis points on various tenures. However, SBI has maintained its base rate at 7.5%.

The revision in deposit rates comes just a day after SBI Chairman OP Bhatt indicated such a move. Bhatt also said on Wednesday that SBI would extend its concessional home loan scheme, due to expire on September 30, by another three months till end-December. Under the scheme, the bank capped the interest rate at 8% during the first year and at 8.5% for next two years. From the fourth year onwards, it converted the loan into a floating rate loan. The scheme became quite popular in the one and a half years it has been in existence, with SBI disbursing Rs. 3,000 crore in home loans every month. The scheme has helped the bank replace Housing Development Finance Corporation Ltd (HDFC) as the largest home loan financer in the country. Interestingly, HDFC initially termed SBI home loan scheme as a "gimmick, Source: Releases sent by respective banks.