State Bank of India’s new chief on Tuesday ruled out any cut in lending rates despite the Reserve Bank of India’s announcing liquidity easing measures.
However, she said there is a possibility of a reduction in the deposit rates given that liquidity will improve in the banking system.
“When the rates were increased (in July by RBI), we did not increase lending rates and absorbed the cost. So there is no question of reducing our lending rates,” said Arundhati Bhattacharya, in her first media interaction after taking over as Chairperson of the country’s largest bank.
Bhattacharya’s comments come a day after the RBI reduced the Marginal Standing Facility (MSF – the rate at which banks borrow from RBI after the borrowing limit under the repo window is exhausted) rate by 50 basis points to 9 per cent.
Festival season
For the festival season, the bank will look at some reduction in interest rates for auto loans and other retail products. According to A. Krishna Kumar, Managing Director, SBI, “We have received some figures from the government to look at retail (growth). We have made some plans and will tweak rates on some existing products.”
However, a cut in interest rates on home loans was ruled out. “As far as home loan rates go, there is no scope for further cuts but we are looking at other products like car loans or others.”
No new retail products will be introduced but the bank envisages rate cuts in some existing products, which have healthy non-performing asset ratios. Going forward, Bhattacharya said interest rates are unlikely to come down as the inflation still remains high at present.
“If you look at where the inflation is currently…I don’t see how interest rates will come down. Not at least in the near future. Hopefully, we will revert to the repo rate as the operational rate.”