State Bank of India, the country's top lender, beat street estimates with a 14 percent rise in quarterly profit, as a surge in credit demand offset higher provisions for bad loans. The bank, which controls a quarter of Indian bank loans and deposits along with its associates, and rivals ICICI Bank and HDFC Bank are seeing strong demand for loans and asset quality improvement on the back of a rapidly growing economy.
But rising interest rates are a concern for the sector. India's central bank is widely expected to raise key rates by 25 basis points on Tuesday to cool accelerating inflation. It would be the seventh increase in the past one year. It had raised its main lending rate by 150 basis points in 2010. State Bank posted a net profit of 28.28 billion rupees ($620 million) in the fiscal third quarter ended December, versus 24.79 billion rupees a year earlier.