SBI to cut lending rate after funding cost & provisioning requirement fall

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Mumbai | Updated: April 2, 2015 1:24:11 AM

State Bank of India (SBI) chairman Arundhati Bhattacharya has said the bank will cut lending rates...

State Bank of India (SBI) chairman Arundhati Bhattacharya has said the bank will cut lending rates when the credit cost and amount of provisioning requirement comes down.

Speaking to a private news channel, she said as of now she does not see more than half-a-per cent rate cut across the year, but that would also depend on how other banks decide to go ahead with the rate cut.

“A little bit would also depend on how banks can make their operations more efficient,” she added.

Deposit rates have come down since July last year after SBI lowered term deposit rates by 25-50 bps in certain categories.

Flush with funds and finding a mismatch in credit demand, banks have been cutting deposit rates for last five months. Analysts say with a lower cost of funding — a result of lower interest on deposits — banks may pass on the benefit to customers with a cut in base rates. The base rate is the lowest lending rate of a bank.

Bhattacharya said everybody would wait for the monetary policy because that gives some indications on the thinking of the regulators as to how it sees the trajectory of various economic indicators.

Growth of non-food credit, which has consistently fallen from 14.2% y-o-y in the beginning of FY15 to 9.7% y-o-y in the September 19 fortnight, has slightly recovered to 10.4% y-o-y for the fortnight ended March 6.

Deposits, on other hand rose 11.77% y-o-y to R84.62 lakh crore for the fortnight ended March 6.

In October, SBI had lowered interest rates by 100 basis points (bps) to 5% for deposits maturing between seven to 45 days. Earlier, SBI had revised term deposit rates in September, too, when it cut retail term deposit rates by 25 bps for certain tenures.

Other public sector banks to revise their deposit rates were Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and Bank of Baroda (BoB). While, PNB revised rates of bulk deposits, OBC trimmed rates in the retail segment.

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