The country’s premiere Bank “State Bank of India” (SBI) on Thursday increased its Prime Lending Rate (PLR) by 50 bps following a hike in Repo rates and Cash Reserve Ratio (CRR).

SBI’s PLR has now been raised to 12.75% and would come in effect from today. The country’s largest Bank has been giving a thought to upward Revision of PLR but had been waiting for the decision from the Reserve Bank of India (RBI) to first announce its measures to curb mounting inflationary pressure. The bank hastened to clarify that liquidity position was under control.

SBI had been maintaining lowest PLR in the industry till now. The declaration to raise its PLR came on Thursday soon before the stock markets closed.

On the other hand, Union Bank also raised its Prime Lending rate to 13.25% which will come to effect from July 1.Union Bank on Thursday also raised deposit rates by 25-100 bps.

SBI officials said they do not plan to hike deposit rates at the moment since rates were raised a month ago. But if the need arises, then the Bank may revise its rates.

Axis Bank too increased its PLR by 50 basis points to 15.25 per cent yesterday which is effective from today.

The story does not end here, since many other banks including ICICI, Punjab National Bank, Canara Bank, Kotak Mahindra Bank and Bank of India are also planning to hike their Lending rates.

The asset liability committee of Punjab National Bank is set to meet today, while the panels of Bank of India and Kotak Mahindra Bank will meet on Monday to take an effective decision.

With RBI’s tough decision to take away Rs 38,000 crore from the system in one go by increasing CRR and Repo rate, the commercial Banks are not left with any choice but to increase their lending rates.

Most household loans like home, auto, personal etc fall under PLR. However, some banks, including SBI, may separate home and auto loans from PLR.

Banks feel making these loans costly might lead to more customers turning defaulters as EMIs would proportionately increase. To keep defaults under control banks are likely to retain home and auto loan rates unchanged as more PSU banks get ready to emulate SBI. Industry sources said the broader increase in rates would be effective in all banks by 1 July.