SBI rate hike sets the trend on interest rates

Banks which have not raised their deposit rates so far are feeling the heat now as the country's largest commercial bank State Bank of India (SBI) has hiked its deposit rates on Saturday.

Taking cue from SBI, HDFC Bank could consider a rise in its short-term deposit rates. "HDFC Bank is into short-term lending, hence we could consider 25 to 50 basis points hike in short-term deposit rates when the asset and liability committee meets next week," said a senior official from the bank. Currently, the bank is evaluating the market trend and the extent of rates increase required, he added.

Alongwith SBI, Oriental Bank of Commerce also raised its deposit rates by 0.25-0.50 per cent today with the above three years deposit now fetching 5.75 per cent (5.50 per cent).

Bank of Baroda, ICICI Bank, Bank of India, Union Bank of India, Punjab National Bank, Allahabad Bank among others raised their deposit rates over the last few weeks.

SBI has also raised interest rates for its fixed and floating rate home loans by 0.25-0.50 per cent. SBI's new fixed home loan rates will now range from 8.50 to 9.25 per cent and the floating rates will range from 7.50 to 8.25 per cent.

SBI's fixed rates are now more expensive than those offered by HDFC at 7.75-8.50 per cent and ICICI Bank at 8.50 per cent.