State Bank of India (SBI) has cut its deposit rates by 25 basis points across all tenures, effective from October 5. With this, deposits having a tenure of one to less than two years will now attract a rate of 6.25% (as against 6.5%), the bank said in a release on Thursday.
Similarly, deposits having a maturity period between two and three years and three to five years will now carry rates of 6.75% (7%) and 7% (7.25%), respectively, the bank said. Also, five to eight years and eight to 10 years deposits will now offer 7.25% (7.5%) and 7.5% (7.75%), respectively. The revision will be applicable for deposits below Rs 1 crore.
The cut in rates will expand the head room for the bank. Lower deposit rates mean the bank can lend at the current rates without its profits taking a hit.
But this is dependent on the interest regime continuing soft till the end of this fiscal. Bank chairman OP Bhatt told FE, ?There is huge growth on liquidity and deposits. But credit growth is still very low. Keeping it in view, there is a remote chance of interest rate hardening until the end of the current fiscal year.??
However, he admitted that margins of the country?s largest bank is under pressure after several rounds of rate-cuts.
?Yes, our margins are under pressure. Still, we are looking forward to increase our net interest margin (NIM) every quarter by 4-6 basis points. If the trend continues, then achieving the target will not be a difficult task for us,?? he added.
On the progress made over merger of State Bank of Indore with SBI, Bhatt said the bank is waiting for the response from the government.
?I think the response will come soon and it will be positive. There are some technical issues that need to be addressed before the beginning of the actual process of merger. We need to devise the share-swap ratio between the State Bank of Indore and the SBI. The shareholders need to agree on that,? he explained.
Even though the boards of both the banks have already approved of the merger, the matter has to go through the process to find out if there are any grievances against the merger within the timeframe of 21 days.
?But, I think the entire process should not take two months or so after the government gives its final approval for the same.?
On the debate whether multi-channel bancassurance should be allowed for the banks, he said a bank which was having its own insurance company would like to have only one. But the bank that does not have any insurance company of its own, it would like to sell the insurance products of more than one insurance companies.
Whether SBI would not go for selling products of more than one insurer, Bhatt said, ?Not really. Look at our mutual fund products where there is no restriction as such and hence we are selling a number of mutual fund products, including our own product, through our branches. We don?t have that mindset. Because we believe that we should offer the best product for our customers, it doesn?t matter from where the products are coming from. As a bank, the duty is to serve the customer. Besides, it gives you a reliable feedback if our products are not going off. In that case, we can have to relook at our own product.??