SBI Chairman Arundhati Bhattacharya on Friday underscored that her bank is ahead of the central bank when it comes to cutting interest (lending) rates.

These comments come in the backdrop of RBI Governor Urjit Patel saying that there is scope for banks to cut lending rates despite the status quo in the policy rate.

In a media interaction after the announcement of the bank’s quarterly results, the chief of India’s largest bank emphasised that while the central bank has cut the repo rate (the interest rate at which banks borrow funds from RBI to overcome short-term liquidity mismatches) by 175 basis points since January 2015, her bank has cut its benchmark lending rate by 200 bps from 10 per cent to 8 per cent.

Scope for more cuts?

Bhattacharya’s comments could be interpreted to mean that there is little room for banks to reduce lending rates. SBI has a market share of 18.15 per cent in deposits and 16.21 per cent in advances in the country.

The RBI had left the repo rate unchanged at 6.25 per cent in its bi-monthly monetary policy review on Wednesday even as it changed the monetary policy stance from ‘accommodative’ to ‘neutral’.

On January 1, SBI had announced a deep 90 bps cut in its marginal cost of funds based lending rate (MCLR) across all maturities. Following this cut, the one-year MCLR came down to 8 per cent against 8.9 per cent earlier.

All rupee loans sanctioned and credit limits renewed by banks with effect from April 1, 2016, are priced with reference to the MCLR.

In his post policy interaction with the media on Wednesday, Patel said “There is still scope for the lending rates to come down because our policy rate came down by 175 basis points and banks’ weighted average lending rate has come down at most by about 85-90 basis points. So, I think there is scope for some more transmission.”

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