SBI raises lending rates by 0.50%

The nation's largest lender State Bank of India on Thursday raised its lending rates by 50 basis points following the recent 50 basis points tightening by the Reserve Bank of India.

"We will have to transmit whatever the RBI had tightened recently to the customers, both in our lending as well as deposit rates," chairman Pratip Chaudhuri told reporters after attending a board meeting of the Reserve Bank in Mumbai.

The SBI decided to hike the rates after holding its asset liability committee meeting on Thursday evening.

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On the much-delayed Rs 21,000-crore (Rs 210 billion) rights issue, the chairman said the bank has sought Rs 5,000-15,000 crore (Rs 50 - Rs 150 billion)  from the government as its share of the proposed rights issue.

Again he did not offer a time-frame for the issue.

Since last fiscal, the bank has been working towards getting its rights issue rolling as the bank badly needs to ramp up its capital base to fuel its growth.

However, observers are not sure whether the government will allow the issue this year, as it will have to subscribe to a little over 59 per cent of the issue going by the equity holding of the bank.

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The government owns a tad over 59 per cent in SBI. And considering the precarious position of the government finances, analysts say, North Block will not allow the bank to go ahead with the issue this fiscal.

On July 26 at the first quarter policy review, the monetary authority had increased its key lending and borrowing rates by a steep 50 bps, stocking the markets and the industry alike, and hinted that its main focus would be managing inflation even at the cost of sacrificing growth in the short-term.

Following this, all almost all the banks, barring the major three ones - SBI, ICICI and HDFC Bank - have increased their lending rates in the range of 25-100 bps.