SBI hikes base rate, prime lending rate by 10bps

SBI, the country’s largest bank, has increased the base rate and prime lending rate by 10 basis points each, marking the beginning of the end of the lowest interest rate regime. SBI’s prime lending rate now stands at 12.3%, up from 12.2%. And its base rate stands at 7.55% from 7.45%.

In September 2021, the bank has decreased the base rate by 5 basis points to 7.45%. SBI has also increased interest rates and fixed deposits above ₹2cr. However, below this amount, the interest rates are unchanged.

The rising interest rates spell comfort for savers. But it is not so good news for borrowers who have taken variable interest rate loans. Base rates act as a reference rate for borrowers and works as an indicator of the direction the nation’s economy is taking.

The prime lending rate is the rate charged by commercial banks from their trusted customers. In India, it is the average interest rate charged on loans by 5 major banks. It is determined by the repo rate. Currently, all commercial banks can set their own benchmark prime lending rate. It is crucial for borrowers, as it affects the interest on a home loan.

This interest rate hike comes on the heels of the Federal Reserve announcing three interest rate hikes in next year.