Loan rates to rise by 0.5-1%

State Bank of India, the country's largest commercial bank, will announce 50-100 basis points increase in lending rates this month following the recent 75 basis points increase in the prime lending rate.

"I have approved it. Within a few days, it will be announced," SBI Managing Director Yogesh Agarwal said on the sidelines of a function here.

The increase in loan rate will be 50-100 basis points, but the increase will be 75 basis points on an average for all loans, including car loan.

However, there would be no increase in interest rates for housing and education loans, he added.

"With demand for credit likely to come down from the first quarter of the next financial year, I do not see interest rates going up further," Agarwal said. Interest rates had more or less peaked, he added.

SBI's loan growth is likely to be around 22 per cent this financial year. The bank has already raised deposit rates recently due to pressure on deposit mobilisation.

Public sector banks are not increasing housing loans up to Rs 15 lakh and education loans up to Rs 4 lakh due to a request in this regard from Finance Minister P Chidambaram.

SBI had raised benchmark prime lending rate 75 bps from 11.50 per cent per annum to 12.25 per annum with effect from February 20.