Further lowering of base rate depends on credit offtake, says SBI chief

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Mumbai | Published: July 3, 2015 12:20:17 AM

Although rates of commercial paper (CP) — an instrument through which companies borrow short-term funds — are much below bank lending rates...

Although rates of commercial paper (CP) — an instrument through which companies borrow short-term funds — are much below bank lending rates, further lowering of base rates would depend on credit offtake, State Bank of India chairman Arundhati Bhattacharya said.

Speaking to reporters on the sidelines of the bank’s annual general meeting (AGM), she said that, at present, credit growth does not give enough space for any further rate cut. “At this point of time, CP rates are still much below the base rate… so, if you are going to compete on the CP market front, we’ll have to lower base rates by more than a 100 basis points,” she said.

She added that SBI has taken the lead in cutting base rates, slashing 30 bps in 2015, and the next pointer would
be credit growth. “When that happens, we can consider lowering it (base rate),” she said.

Bhattacharya said she does not expect anything great to happen on the credit growth front in either Q1 or Q2. “I have said earlier as well that the fourth quarter of the year should be good and I still maintain that’s how it will be. We are not expecting anything great to happen, it has not happened in the last quarter and I do not think it will happen this quarter,” she said.

The SBI chief said the bank’s target on the lending side is 14%. “Segmentwise, it would differ a little as we are more focused on retail and corporate segments than SME and mid-corporate. I would be happy if they (SME and mid corporate) clocked around 10-12%,” Bhattacharya said.

She said certain stalled projects are beginning to move. “A few of them which need equity are still stalled, but most others are beginning to move. We will see some amount of disbursements there, but still the overall demand push is slow,” Bhattacharya said.

Loan growth in the first couple of months in FY16 has shrunk with very little demand for credit. Companies have preferred to access the CP market for their short-term needs and banks seem to have lent more via the CP route than through loans. Bhattacharya also said that, at present, talks of merging SBI subsidiaries are on the back burner.

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