After RBI's rate cut, when will banks cut deposit rates? Here's what SBI Chairman CS Setty says

The Reserve Bank of India's Monetary Policy Committee (MPC) has decided to cut the policy repo rate by 25 basis points, from 6.5 percent to 6.25 percent. India's largest lender State Bank of India will see a decline in its lending rates linked to an external benchmark (EBLR) this month itself, said Chairman CS Setty.

Nearly 28 percent of SBI's loan book is linked to the repo rate. Speaking to Business Standard, Setty said, "We will have an ALCO (asset-liability committee) meeting this week. From this month itself, it will be effective."

When asked when banks would reduce their deposit rates following RBI's move, Setty said he expects most of the lenders to not immediately make any changes on that front. "They may wait for this quarter to be over. This is a busy quarter for everyone. Credit growth is also good in this quarter. For that, they definitely need deposits also. My view is that, a few banks may take a call but most banks will wait for the next quarter to see if they want to cut deposits," he said.

Before the rate cut was announced, SBI Chairman Setty was asked about the prospect. He then said that repricing of deposits is an option that the bank has to defend margins in case of the rate cut.