SBI cuts interest rates for exporters by 50 bps

India's largest lender the State Bank of India (SBI) on Thursday slashed interest rates for exporters by 50 basis points. The bank's chairman Pratip Chaudhuri informed reporters about the decision on the sidelines of a CII conference, held here in Mumbai.

The Reserve Bank of India (RBI) in its mid quarter monetary policy on June 18 had enhanced the limit of export credit finance from 15% to 50% to provide lenders an additional liquidity windown. It was expected to inject Rs 30,000 crore liquidity in the system. This means, the total exporters' loan book stands around Rs 60,000 crore.  

Enhancement of credit limit means that banks can now raise more resources at 8% (repo rate) to the extent of 50% of their loan exposure to exporters. This is generally fortnight (15 days) money unlike the overnight repo borrowing.

Global investment banker, Morgan Stanley on Wednesday maintained its 'underperform' rating on State Bank of India with a target price of Rs 1,425, after a meeting with the lender's management. It expects SBI's net interest margin to remain flat quarter-on-quarter in the June quarter, and fall by 10-15 bps to 3.7-3.75% in FY2013. SBI, according to the report, is likely to record a loan growth of around 15% year-on-year in FY13.

SBI's current base rate is at 10% p.a. The lender generally add around 2-3% above base rate to price an exporter's loan.