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Last Updated : Sep 20, 2012 03:05 PM IST | Source: CNBC-TV18

Don't expect slippage in margins due to base rate cut: SBI

Pratip Chaudhuri, chairman, SBI says the base rate cut is extended to all loan categories. "The margins are holding. Whatever drop happens by this process, we will make up by getting additional business," he adds.


The State Bank of India has cut its base rate, the minimum interest rate at which it lends, by 25 basis points to 9.75%.


In an interview to CNBC-TV18, Pratip Chaudhuri, chairman, SBI says the base rate cut is extended to all loan categories. "Out of total loan book of Rs 6 lakh crore, Rs 5 lakh crore, which amounts to approximately 80-85% of the book, is indexed to the base rate," he adds.


He further says domestic net interest margin (NIM) continues to be robust at 3.95%. "The margins are holding. Whatever drop happens by this process, we will make up by getting additional business," he adds.


Also read: SBI cuts base rate by 0.25% to 9.75%


Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Sonia Shenoy.


Q: You have cut your base rates. Can you just take us through across which categories of loans will we see a reduction? Will it only be consumer facing loans or you will extend the rate cut across categories?


A: This rate cut is extended to all categories. Out of total loan book of Rs 6 lakh crore, Rs 5 lakh crore, which amounts to approximately 80-85% of the book, is indexed to the base rate. So, it will benefit all categories present and past borrowers.


Q: Where your net interest margins are heading now? In the light of the deposit rate cuts that you took a few weeks back and now the lending rate moves that you have taken, will they be protected or will there be any significant change in the margins?


A: We assessed our net interest margin for the month of August. The domestic net interest margin continues to be robust, 3.95%. So, the margins are holding. Whatever drop happens by this process, we will make up by getting additional business.


Q: How much of this softening of rates will help increase your credit growth?


A: Significantly. We expect the trigger to come in the home and the car loan segment, the consumer financing.


Q: Because of the improvement in the bank liquidity, is there a possibility of further lending rate cuts, incremental to this 25 bps that we have seen now?


A: With the current cost structure, possibly no. If there are further cuts in the CRR then ofcourse there would be room for more interest rate cuts.



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First Published on Sep 20, 2012 09:04 am
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