SBI slashes bulk term deposit rates by 125-190 bps across tenors

State Bank of India has slashed bulk term deposit rates between 125-190 basis points across various tenors from November 24. Bulk deposits cover funds over Rs 1 crore but less than Rs 10 crore.           

The rates for 7-45 days has been cut by 125 bps to 3.75 percent, while the largest cut is in the 180-210-days deposit by 190 bps to 3.85 percent.

The state-owned bank's CFO Anshula Kant told CNBC-TV18, the cut was imperative given credit offtake is low and fund inflows have been huge following demonetisation. SBI has garnered deposits of over Rs 1,15,000 crore so far.Bulk deposits currently constitute about 8 percent to overall deposits at SBI, Kant said.Lending rates will also gradually come down in tandem with deposit rates, she said while declining any comment on the quantum of lending rate cut. "Every month we have been gradually reducing MCLR rates...going forward reduction will be a bit steeper," she added.On the impact of the rate cut on cost of funds, Kant says the benefits will accrue with a lag. "It will only come when these higher interest rate deposits mature and fresh ones come at lower rate," she said. Below is the transcript of Anshula Kant’s interview to Shereen Bhan, Surabhi Upadhyay and Ritu Singh on CNBC-TV18.Shereen: It is a fairly aggressive cut on bulk deposit rates that SBI has announced. The first questions coming in to us, what about retail deposits?A: Retail deposits, actually we had reduced, not at this huge cuts on November 17 itself. These are bulk deposits which are typically Rs 1 crore and above and most of these deposits are from non-retail customers. These are usually corporate treasuries who put in money and they typically move from bank to bank depending on which bank is offering higher rates. And also, usually, they are at the shorter end in terms of the tenure.Given that credit offtake is low and this huge inflow of deposits that we have seen in the last 8-10 days, we decided to be more aggressive in our cuts for the bulk depositors.Ritu: If you could again clarify what is the amount of deposits you have received so far since the demonetisation drive was announced?A: I will give you the net figure. The net figure is in excess of about Rs 1,00,000 crore. That is net of the withdrawals.Ritu: A deposit rate cut usually precedes a lending rate cut. What kind of reductions can we expect there? We understand this is on bulk deposits of over Rs 1 crore and over Rs 10 crore. Will a lending rate cut follow soon from SBI?A: The Marginal Cost of Funds based Lending Rate (MCLR) formula is actually built like that that once you cut deposit rates, the MCLR does go down. And as I just mentioned, November 17, we did cut the retail deposit rates as well. So, surely, when we announce our next MCLR, there will be a reduction.Ritu: How much room for reduction, if you could clarify, how much room is there to bring down lending rate by because even the Prime Minister’s Office (PMO) has been focusing on how this whole demonetisation exercise and the deposits that have been flowing into the bank chest should be utilised to extend loans to the rural sector, the rural economy, bring down lending rates. So, what should we expect from SBI?A: Every month, for the last few months also if you see our MCLR, we have been reducing our MCLR gradually every month. And going forward, the reduction will be a bit steeper than it has been in the past. We are actually very keen to explore all lending opportunities. We have been doing that. The problem is that the lending opportunities have not been that significant this year in the economy. So, you have seen for the system as a whole, 9-10 percent is the credit growth that has happened so far. And deposits, even without this big influx of deposits that we have seen, which is come mostly in the current account or savings banks since November 8. Deposits had been growing at about 13 percent even prior to that.Shereen: You said that you expect a steeper cut. Can you give us some sense of what the average cut has been and when you say steeper then perhaps we have to extrapolate what we can expect, because the government seems to believe that radical rate cuts are on the anvil?A: If you look at the structure of our deposits, about 42-43 percent is current account and savings bank, there has been no change in these rates and we have about 8 percent or so, which we have cut today bulk deposits -- so you can sort of extrapolate. It cannot happen hugely significant cut in one month you cannot do because you need to first precede that with a very significant deposit rate cut.Bulk deposits form about 8 percent of our domestic deposits, so they will go in by that much proportion I suppose. I think the last month the cut was from 9.05 percent to 8.90 percent the base rate, so it was 15 basis points marginal cost of funds based lending rate (MCLR) cut we did last month.Surabhi: You mentioned that bulk deposits right now account for almost 8 percent of your total deposit base. Given the magnitude of the cuts, the cuts were ranging between as much as 210 basis points in certain tenures, what will the immediate impact of this move be on your margins?A: These deposits will mature on the maturity date. So existing deposits don’t get repriced onwards, its only at the maturity date that customers may then decide whether they want to roll it over within our bank or take it into another bank, which is offering higher rates. So immediately there will be no impact, but yes when you cut your deposit rate that sort of gives you upside on the interest expenses or upside on your margins, but it happens with a time lag.Ritu: How much would your cost of funds have gone down by with this massive bulk deposit rate cuts that you have undertaken?A: Right now nothing. It is only when these higher interest rate deposit rates mature and fresh deposits come in at a lower rate. That is the time when you see an upside in your cost. So, whatever cost of deposits we have been seeing a decline in over the last few months by one or two basis points every month, those are the outcome of deposit rate cuts, we may have done six months ago or nine months ago or one year ago.Surabhi: You mentioned that lending rate cuts will be steeper now going forward because you have more elbow room following these big deposit rate cuts. If you could give us some sense, I know you cannot share numbers, but will the cuts on the lending side, somewhat match the cuts on the bulk deposit side?A: No, that when our asset-liability committee (ALCO) meets, we will decide. It is hard for me to give you a number like this, because like I said, they do not impact our expenses right now.Ritu: When is your ALCO meet? We will keep a tab for sure.A: We meet every month. I do not, off-hand, remember the date yet.