The foundation day of the State Bank of India came with a pinch of salt for its customers as the bank’s chairman hinted at a home loan rate hike in a week. The bank was celebrating its foundation day on 1st July, when it launched 101 branches and also became the first public sector bank to utilize mobile banking services.

Speaking on this occasion, State Bank of India (SBI) chairman, OP Bhatt, said that the bank will take a call on its home loan rates after a week. He also said that the bank is not ruling out further monetary tightening measures from the Reserve Bank of India (RBI).

Last week, the bank had raised its benchmark prime-lending rate by 50 basis points to 12.75%. This action was taken following the RBI’s hike in repo rate and CRR, aiming to reduce the demand in the economy. Mr. Bhatt said, “The hike in PLR would have consequential impact on the corporate sector. A slowdown in demand due to the increase in PLR cannot be ruled out.”

Mr. Bhatt said that the home loan business of SBI has seen a higher growth rate in April and May compared with the same period last year. However, he admitted that the interest rate-sensitive sectors like automobile loans may get affected if interest rates went up.

Present as chief guest on the occasion, Union Finance minister P Chidambaram said that the massive farm loan waiver scheme has been delivered on schedule by banks to the full satisfaction of the government. The finance minister had set June 30 as the deadline for waiving farm loans spanning over more than four crore accounts in his now famous budget speech. The size of the loan waiver scheme was increased in May to Rs 71,680 crore from Rs 60,000 crore set initially as the ambit of beneficiaries increased.

The waiver scheme has made farmers eligible for fresh institutional credit for the kharif crop. The finance minister said, “No faults have been reported regarding the implementation of loan waiver and that if any complaints arise, it will be immediately addressed by the grievance officers.”

Advising the banks, the finance minister asked banks to take measures to make financial inclusion possible. He also pointed out need of public sector banks to capitalise on the marked preference towards the PSUs compared with private sector banks, among the masses, and advised them to expand aggressively.

Mr Chidambaram was present as the chief guest at the inaugural function of 101 branches of SBI. He distributed fresh loans to some farmers whose debts were written off under agriculture debt waiver and debt relief scheme.