According to recent press reports the State Bank of India has raised its base rate by 25 basis points (a basis point is 0.01 percentage points), before the release of RBI’s monetary policy review. The new base rate of SBI from 25th April 2011 would be 8.50%. Reports said that there are fair chances for the Reserve Bank of India to raise the policy rates in order to control inflation.
It is believed that the other banks too will follow SBI in raising their base rate because the central bank has planned to control the growing demand for supply that has gone beyond the ability of the manufacturers. Standard Charted bank has predicted its policy rate to be doubled to 100 basic points this year.
The existing home loan borrowers of SBI who are under the dual rate or the teaser rate scheme are protected from the hike. All the others who are going to receive loan in future will be affected by the hike.
The bank has also increased the benchmark prime lending rate from 13% by the same extent to 13.25% a year, now. All the other banks are waiting for the for the RBI’s policy that is expected to be published on the 3rd of May 2011. Banks are expecting the RBI to make monetary squeezing policy stronger by raising the key rates.