Acting on the new monetray policy framework, the Reserve Bank of India (RBI) on Wednesday cut repo rates by 25 basis points, second time in less than two months, ostensibly to achieve the 2016 inflation target of 6 percent. The common man, however, is yet to taste the benefits of rate cuts as none of the banks have come forwards to lower their lending rates.Interestingly, many lenders cut deposit rates when the January repo cut was announced.
Country's largest public sector lender State Bank of India (SBI) has remained non committal to the issue. Speaking to CNBC-TV18, P Pradeep Kumar, MD, SBI said the decision to cut base rates or not will be taken by asset liability management committee (ALCO). He said SBI has already lowered deposit rates.
Below is the verbatim transcript of the interview on CNBC-TV18 Latha: Two cuts from the RBI, will now the bankers move? Will we see some fall in base rates? Kumar: I don’t know, our asset liability management committee will perhaps meet later in the week and take a call. Latha: What is your reaction to the cut itself? Kumar: I think they are acting in tandem with the fiscal. There have been some fiscal incentives in the Budget for growth and perhaps they are acting in tandem with the government. Sonia: Do you not see this as any pressure coming in from the government to act because the fiscal deficit targets have been relaxed and there was an expectation that the RBI would delay the rate cut because of that? Kumar: There is no pressure from the government. We take an independent call on all the rates. Latha: So you expect first deposit rates to fall now? Kumar: Any cut in repo rate should automatically trigger a cut in deposit rate. At SBI, we have already cut 1-2-3 year, which is the bucket which is a highest 3 year deposit by already 50 bps starting from September -- two cuts of 25 bps each. We are below the market, most banks are at least 25 bps ahead of us. So we will take a call on what to do with the deposit rates also.
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