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There should be a pause in rate cutting in Aug: Prashant Kumar, SBI

We are quite comfortable on the liquidity side as a bank and also as an industry.

ET Now|
Updated: Jul 29, 2019, 09.35 PM IST
SBI cuts deposit rates, keeps lending rates unchanged
SBI cuts deposit rates, keeps lending rates unchanged
First whatever has been cut in the system so far should be transmitted by the banks, and, if there is a need, it can be reduced further, says Prashant Kumar, CFO, SBI. Excerpts from an interview with ETNOW.

What prompted this deposit cut?
We have taken this call due to to the more comfortable liquidity position and need to transmit the regulatory rates in the market.

When we talk about interest rate cuts or corporate borrowing, interest rate cuts are the bigger part of that. How low are interest rates and how is it happening in the system? Do you think that interest rates can come down further from here until you see a big pickup as far as corporate loan demand is concerned?
No, the demand from corporate loan is not only linked to interest rates, but so many other things also. Though this is a very important factor, it is not the only factor. So, we believe that if all other things also improve, then definitely the reduction in pricing would definitely help in fuelling the corporate demand.

It is quite interesting that your rate cut is coinciding with the commentary coming in from our finance minister of a significant rate cut being required and doing great things for the economy for bringing growth back. Your other peer -- Bank of Baroda -- also cut rates last week. Do you think that the much criticised transmission issue is finally happening in the system?
Transmission was happening earlier also. If you remember we are in the lowest MCLR which is 8.40% that has come down from 8.55%. So, a 15 bps cut in MCLR has already happened. But the cut in the MCLR does not happen overnight. It takes its own time. Gradually when the liquidity position improves, you first reduce on the liability side, then only would you be in a position to reduce the MCLR.

Can you explain to us the 50-75 bps cut which you are undertaking across tenures today? What kind of proportional impact will it have on the lending rates going forward and how soon can it happen?
It takes its own time; there are so many factors. Basically, if you see the MCLR, it is like the repo rate direction depending on this direction. Wwhen the liquidity position improves and you are in a position to control the deposit side then MCLR is a formula driven pricing. So depending on the cost of deposits and operating cost, the formula determines what would be your MCLR. So, the issue is always how much you can cut on the deposit side.

7th of August is when the next RBI policy meet is scheduled. Do you see further reduction in rates from here on?
Yes, we are reading so much about this in the newspapers. But we believe that this is a time where we take a pause. We first transmit whatever has been cut in the system so far and, if there is a need, it can be further reduced.

What proportion, or at what level, are you lending to NBFCs? We speak to a lot of NBFCs and they are maintaining the commentary of PSU banks in general being very cautious in conducting business.
We are very near to our quarterly results, so at this point of time I would not like to make any comments regarding these issues.

Just update us with the liquidity situation right now in the system.
We are quite comfortable on the liquidity side as a bank and also as an industry.

Also Read

Bank mergers over, there will be 12 PSU banks left: Prashant Kumar, SBI

SBI is transmitting 65 bps of total 75 bps rate cut to CCOD customers: Prashant Kumar

SBI’s liquidity position is very comfortable with LCR of 140%: Prashant Kumar

Capital conservation buffer extension is good for all of us: Prashant Kumar, SBI

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