Base rate cut, reforms push to raise loan demand: SBI

Written by Sajan C Kumar | Chennai | Updated: Sep 30 2012, 06:32am hrs
Countrys largest commercial bank State Bank of India (SBI) is hopeful that the recent government measures on reforms front will trigger loan demand from industry and SMEs sector. With reduced lending rates, post-RBI policy, the bank is of the view that the field is now open for entreprenuers who have been reluctant to borrow owing to global slowdown and sluggish demand for produced goods.

A Krishna Kumar, managing director and group executive (national banking), SBI, said, The reduction of base rate by 25 basis points to 9.75% would also give a push to the loan growth.

Speaking on the sidelines of a corporate social responsibility (CSR) initiative of the bank here on Saturday he said that while there was a loan growth in sectors like agriculture, and retail during April-August this year, the industry sectors especially SME sector did not see much of borrowing. We expect the recent developments could trigger growth in the industry which would result in more loan offtake, he said.

On poor loan demand from the industry, Krishna Kumar said that with the economic slowdown affecting the overall sentiments, even the loans sanctioned to the SMEs were not claimed by the borrowers.

Asked whether the recent rates would spark increased loan offtake, he said it would definitely influence the borrowers, but said that it was not the only element. The slump in borrowing was not only because of the interest rate. There should be an offtake of products in the market, so that the manufactured product would not remain in shelves which would affect the industry, he said. The recent reform announcements by the government is expected to bring confidence among the industry and might result in increased borrowings. There is an indication that many borrowers are coming forward to claim their loans, he added.

SBI had recently announced a cut in base rate following the policy announcement by the Reserve Bank. The 25 bps cut is expected to help the bank to grow its loan book, since a majority of its R6 lakh crore loan book is linked to the base rate mechanism. At present, the interest rate for home loans of up to R30 lakh is 10% and the rate for loans above R30 lakh is at 10.15%. SBI currently has a market share of 25-26% in home loan segment, said Krishna Kumar. Ours are the cheapest rates available in the market and EMI starts at as low as R878 per lakh, he added.