The State Bank of India (SBI) today hinted that base rate that will replace existing prime lending rate (PLR) will be between 7.5 per cent and 8.5 per cent
"We are working out the number...It could be between 7.5 per cent and 8.5 per cent," SBI Chairman O P Bhatt told reporters on the sidelines of seminar organised by the CII here today. The bank would announce the base rate by June 15, he added.
The base rate is the lowest rate that the bank can charge from a customer and is intended to bring about more transparency in the lending operations of banks.
The Reserve Bank of India has proposed to replace PLR with base rates from July. PLR of SBI is currently is 11.75 per cent.
On the liquidity condition in the system, Bhatt said it is "fairly tight" and likely to continue so in June because there is going to be large outgo on the account of advance tax payment and payment towards broadband wireless access (BWA).
"Now with liquidity already tight at this point of time and these two major events takes place in June. So, in June it would continue to be tight," he said, adding "July onwards may be some of these money gets recycled and also you have monetary policy of Reserve Bank then we will see what is the response of the system."
Without giving clear indication on whether banks could increase rates post July, he said: "There is already an upward bias on the interest rate. If liquidity is tight there will obviously be an upward bias on interest rates."
He also said liquidity is tight and other economic activity is picking up. So, the credit demand is also going to pick up. "So the (upward) bias is definitely there," he added.
