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  1. #1
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    Dec 2009

    Default State Bank of India sets base rate for lending at 7.5 percent per annum

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    The State Bank of India (SBI) has set its base rate for lending at 7.5 per cent per annum, after the Reserve Bank of India (RBI) introduced the new lending rate system.

    Addressing a press conference here on Tuesday, Om Prakash Bhatt, Chairman of SBI, said: "The base rate would be effective from July 1."

    "We decided after three or four discussions at the Central Management Committee of the State Bank of India that we should pitch somewhere in between so that for the future, the rate changes are captured in a more equitable manner both for new customers as well as old customers. This was our logic. On that basis it has come to 7.5 per cent," he added.

    As per new rules, the base rate will be applied when the customer comes for renewal of a loan contract. However, this does not apply to finance companies and they will be continue to fall under the Prime Lending Rate (PLR) mechanism while charging interest rates.

    No bank can give out funds at an interest rate lower than the base rate.

    Bhatt, however, added that this change would definitely bring more transparency in transactions.

    "There should not be any financing below whatever is the reference rate. Earlier it was called PLR (Prime Lending Rate) now it is called base rate, so that continues. The spirit was that there would be more transparency in the pricing of products that has happened," Bhatt said.

    Most of the state-run banks are expected to fix their base rate between 8 to 9 per cent and this provides nationalized banks to give tough competition to private-sector banks in the country.
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