SBI unlikely to hike rates in next 6 months

Written by fe Bureau | Jamshedpur | Updated: Dec 30 2009, 08:53am hrs
The State Bank of India (SBI) has turned down any chance of hike in interest rates in its credit portfolio in the coming six months. The bank also thinks the stimulus packages announced by the government should not be withdrawn suddenly. Instead, it should be allowed to continue till real growth was witnessed in the economy.

Regardless of what happens to inflation, I dont think there would be any increase in interest rates in the next six months, said SBI chairman OP Bhatt. He was interacting with the reporters after honouring 22 of the banks Patna circle achievers.

With the (already existing) surplus liquidity and the rate at which (bank) deposits were increasing, I dont think there would be any pressure on the banking system in the next six months to increase interest rates on loans, said Bhatt.

The SBI chairman said the banks decision in early 2009 in fixing home loan rate at 8% had, while forcing the entire banking industry to revisit their rates, helped stabilise the economy as builders and buyers came back while steel, cement and construction workers saw demand going up again.

Asked if the packages announced by the Centre could be withdrawn in the near future, Bhatt said, I dont think it will be taken out in a hurry; and even when they take it out, they should phase it out and not take out at one shot.

The SBI chairman said credit growth in the country was still not taking place at the desired speed.

It has started improving but it is still not where it should be, and it is possible that if the stimulus provided by the government is withdrawn, it may hurt the growth that is taking place; it would be wiser to continue with it for some more time till we are sure that growth has actually returned, said Bhatt.

Justifying the need behind opening of around 1,000 SBI branches each year, the SBI chairman said the country, being the second-highest growing economy in the world today with a 7% GDP growth rate, peoples banking needs were expected to grow at a tremendous pace in the coming years.

Bhatt, in a lighter vein said, even a target of opening one lakh SBI branches in the coming years would be insufficient to meet the countrys banking needs as there were huge areas which were either under-banked or un-banked.

Asked how merging six of its associate banks with itself would help SBI, Bhatt said, It would have no impact on SBIs growth, adding, however, that the merger would definitely improve our efficiency.

With State Bank of Saurashtra having already merged with SBI and State Bank of Indore (in which SBI holds 98%) being in the pipeline, SBI is not too much concerned about the merger issue as two of its biggest associate banks, i.e., State Bank of Hyderabad and State Bank of Patiala, were already fully owned by it while in the other three (State Bank of Travancore, State Bank of Mysore and State Bank of Jaipur & Bikaner) it had stakes not lower than 75% in each of them.

It would be more of a restructuring within the group, the chairman said, as SBIs market share, which stands at around 24-25% today, would remain unchanged irrespective of whether a merger finally took place or not.