SBI spares edu, home loans from PLR hike

State Bank of India (SBI), the country's largest bank, today raised its prime lending rate (PLR) for the second time in less than three months, but decided to spare existing home and educational loan borrowers from the hike.

SBI has raised its PLR by 75 basis points to 12.25 per cent with effect from February 20 and also announced it will offer the highest interest rate of 9.5 per cent among commercial banks for deposits with maturity of four years to less than five years.

The bank said existing housing loans up to Rs 15 lakh which qualify as priority sector lending and existing educational loans have been excluded from the hike in PLR and the necessary adjustment in the spreads above/below the PLR would be made.

Existing and new agricultural loans up to Rs 3 lakh and new educational loans up to Rs 4 lakh have also been exempted from the hike.

SBI Managing Director T S Bhattacharya said, "We were lending at up to PLR minus to 2-2.5 percentage points. Now, we will lend at nothing less than 10 per cent since deposit rates are also in double digits. The real estate sector will be hit the most."

SBI decided to offer 9.5 per cent interest on deposits so as not to depend on bulk deposits for resources with rates on the large deposits having already touched 10 per cent.

SBI's net interest margin has been under pressure because of rising cost of deposits. Its NIM had shrunk to 3.29 per cent in October-December 2006 from 3.50 per cent a year earlier.