The country?s largest lender, State Bank of India, on Thursday said it would reduce its lending & deposit rates and raise a chest of Rs 5,000-10,000 crore for possible foreign acquisitions.
The bank?s chairman hinted at a reduction in the housing loan rates and talked about the resource crunch faced by overseas branches and an incumbent liquidity problem.
The bank would cut its benchmark prime lending rate (BPLR) by 75 basis points to 13% from Monday, November 10, and pare interest rates by 50 bps on deposits between 91 days and five years and 25bps on those above five years, from December 1.
?The recent monetary measures have allowed us to lower the PLR. SBI is attracting deposits worth around Rs 1,000 crore per day. The bank?s credit-deposit ratio is about 74% at present,? OP Bhatt, chairman, told reporters at a Ficci conference here.
Bhatt said SBI is expected to raise Tier-II capital worth Rs 5000-10,000 crore by December 2008 depending on the market condition. This, he said, would also enable the bank to make overseas acquisitions, as many good banks are available at an attractive valuation. Bhatt also admitted to a rise in the bank?s non-performing assets across sectors and a slowdown in credit to certain sectors like auto, gems, diamonds & jewellery, textiles and real estate.
?However, we have not stopped lending to any of these sectors although we remain prudent in lending to the corporates,? he said.
Bhatt also hinted at a reduction in SBI?s housing loan rates by 50 basis points after the PLR cut. ?A correction in the real estate prices would also help increase the demand for housing loans in the country,? he added. Between March-September 2008, SBI?s market share in housing loan rose by 0.75% to 18%.
Commenting on the issue of capitalising the banks? overseas branches, Bhatt said, ?It is a pro-active, preventive measure taken by some of the Indian banks to ask RBI for dollar loans to cushion their overseas branches. The resources of most of the Indian banks operating abroad have almost dried up. Since foreign financial institutions? resources have become scarce, the lines of credit available to Indian banks in foreign locations are exhausting.?
On the liquidity position in the banking system, Bhatt said since FDI, FII investment and ECBs have dried up, liquidity pressures may increase in the coming month as the busy season begins. However, there exists no liquidity problem in the system at present, he said. The regulator may take necessary steps as and when required to tackle the situation, he said.