SBI sees more room for lending rate cuts

Moneycontrol Bureau

India's largest lender the State Bank of India (SBI) on Monday hinted at  lending rate cuts going forward. However, the lender ruled out any further reduction in the base rate, the benchmark rate below which, RBI does not allow to lend.

"There is a scope for cutting rates if large scale projects come to closure," SBI Chairman Pratip Chaudhuri told reporters while addressing a press conference on rate cuts here in Mumbai.

"We are leading the path of lower interest rate. Lower EMIs are immensely helpful to individual households. We are sitting on an excess liquidity of 70,000-80,000 crore. In fact, the net interest income for august was higher than in July. Our net interest margin is very robust at 3.89%. We thought that we can possibly sacrifice a bit of NIM," he said.

Last week, the lender slashed base rate by 25 basis points to 9.75% with effect from September 20. At the same time, it reduced benchmark prime lending rate (BPLR) by 25 bps to 4.50%. Borrowers who had taken loans before September, 2010 will be benefited after BPLR cut. The Reserve Bank of India had replaced BPLR system with the base rate regime.

Earlier, SBI had reduced the interest rates on home, auto and SME loans by over 50 basis points, effective from August 07. However, that was a decrease in spread or the difference between base rate and the mark-up.

"Given that the bank has already reduced the base rate, another round of (base) rate cut is difficult. However, SBI may go for reducing rates by decreasing spreads in select loan categories," the chairman pointed out.

The reduction in base rate, according to Choudhuri, was more secular and benefits everyone to equal extent. There was criticism that banks are not passing on interest rate cut uniformly. The latest rate cuts also answered the same.

Also read: Banks propose measures to revive flagging housing sector

SBI aims to achieve a credit growth of 18-20% year-on-year in FY13. Moreover, auto and home loans are expected to grow at 20-25%. So far, the bank's loans expanded 14.5% y-o-y while deposits grew around 16% y-o-y.

Commenting on asset quality, the SBI boss said that the overall situation in non-performing assets will be marginally better in July-September quarter as compared to April-June quarter.

SBI will require Rs 1-1.20 lakh crore capital to meet the Basel III norms that are to be implemented by 2018.

saikat.das@network18online.com