State Bank of India on Wednesday marginally increased the short-term lending rates across overnight to three-year maturities by 10 basis points (bps) with immediate effect.

While banks have almost fully passed on the 250 bps interest rate hikes by the Reserve Bank since last May, they have not yet increased deposit rates commensurately, leading to a funding gap and forcing them to borrow from the market.

For the fortnight ending January 13, credit growth rose 16.5 per cent annualised against 10.6 per cent growth in deposits. According to the SBI website, the bank has increased the overnight lending rate, based on the marginal cost of funds-based lending rate, by 10 bps to 7.95 per cent, while the same for one-and three-month maturity has been increased to 8.10 per cent.

For a six-month loan, the bank has been charging 8.30 per cent before the increase which now stands at 8.40 per cent; one-year tenure loan that used to come in at 8.40 per cent is costlier by 10 bps now; two-year tenure loans now cost 8.60 per cent, while the three-year money is priced at 8.70 per cent, after the 10 bps upward revision.

As against this, the bank offers the lowest savings bank deposit rate at 2.70 per cent if the amount is less than Rs 10 crore and 3 per cent if the deposit is over Rs 10 crore. The lending rate hike won’t affect the retail customers of home loans and auto loans as they are of long-term duration.