This rate hike is post a week after the Reserve Bank raised its lending and borrowing rates by 50 basis points. A 14-day deposit at SBI will return 6.25%, against 4% earlier, while one-year returns remain at 8.25%.

SBI has also raised deposit rates by up to 225 basis points on select four maturities.
Over 20 banks including Punjab National Bank, ICICI Bank, Oriental Bank of Commerce and Corporation Bank have been on a rate hike spree within a week of the Reserve Bank's decision to raise short-term key rates in its annual credit policy on 3^rd May.

Under previous chairman SBI’s rates were not increased at par with its competitors but now they are catching up with rivals. Furthermore, SBI may be aiming to boost growth and adjust its mismatch between loans and deposits, hence, offering more on the shorter tenor deposits. But other banks could be forced to match SBI rates in the short term.

Now SBI home loan EMIs are likely to go up by 50 per lakh on a 20-year home loan following the base rate hike. Even the demand for loans may fall as retail consumers will postpone purchases. Also the net interest margins of the bank, which are already under pressure, may be squeezed further.