May drop lending rates further if RBI cuts 50bps: SBI

Pratip Chaudhuri, Chairman, State Bank of India said that the latest round of cuts are different from the cuts undertaken in May. If the RBI announces a 50 bps rate cut, then the bank is willing to drop lending rates first, informed Chaudhuri. He further added that lending rates are conditional on CRR cut and therefore, he is not committing a base rate cut at this point.

Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.

Q: In the State Bank press conference today some of those lending rate cuts were announced. Are these different from the ones you did in May, have some additional rates been dropped?

A: Yes, these are different. In May we had dropped the car loan rates and rates for education loans. But, we had said at that time that since the CRR cut has been very significant, 1.25%, we need to have slightly deeper cuts. We are really trying to be selective and after the liquidity situation settled down from June 1, we have brought in extensive cuts in interest rates, particularly for the SMEs and the commercial sector.

Q: So most of these lending rate reductions are for the SME sector and the mid corporate sector?

A: And even larger.

Also read: SBI takes credit guarantee cover for MSE loans below Rs 1cr

Q: When would you think of extending it to the base rate and to the retail sector?

A: At present we don't think we need to extend it to the base rate. We are re-balancing our portfolio. Our portfolio got skewed in favour of home loans and we lost out a lot of SME business. So we are trying to retrieve the lost space.

Q: What about your expectations going into the credit policy? Given the monetary policy objectives, growth has not done very well at all and inflation has not quite gone down. We still have a March inflation that has been yanked up. What are your expectations at this juncture?

A: It is not expectation, we have made a request to RBI that this is the time when we need to get the rate of interest down. I do not say that getting the rate of interest down will solve all problems, in my view this is a necessary but, a sufficient condition.

Let us start making the necessary ground condition. If there is a 1% CRR cut, I think more than the actual cut which ofcourse would happen in time, it will give a boost to the whole investment mood, the lenders mood and the mood in the economy.