State Bank of India chairman Arundhati Bhattacharya on Tuesday said lending rates will come down when credit picks up and the cost of funds come down.
“The fact that we are adjusting on the deposit taking side means that going forward all of us are seeing a rate cut. But exactly when it will happen is not something I can really tell you now,” Bhattacharya said here after launching the SBI Compsite Index.
Some banks, including HDFC Bank, ICICI Bank and IDBI Bank had reduced deposit rates last week apparently to bring down the cost of funds.
“What the banks are waiting for is a little bit more of a sign of a credit pick-up. Whatever we say, when we cut the lending rates our income comes down and we need some other ways of making up that income to keep paying interest on deposits. That can always happen if the credit growth is quite robust and volume picks up,” she said.
“But when the volumes are very thin and if you are not seeing that kind of a clear pipeline, then it is very difficult to cut lending rates. So, I think most of us are waiting to see a little bit more of a pick-up in credit,” Bhattacharya said.
The credit growth is slowly inching up and is definitely better than the growth up to September, she said. “Retail growth is alright. On the corporate side also we are seeing a little bit growth now, though new projects are still a challenge,” she said.
On the aviation sector, Bhattacharya said SBI does not have any exposure to the cash-strapped Spicejet. “It’s (aviation sector) a difficult sector to operate,” she said.