The State Bank of India (SBI), India's largest commercial bank, will soon initiate internal discussions to explore the possibility of reducing the prime lending rates (PLR) after the central bank has cut bank rate by 50 basis points, bank chairman Janki Ballabh, said. The bank ruled out any immediate possibility of offering variable interest rates on fixed deposits in the immediate future.
Ballabh said the decision would be taken soon on the question of reducing PLR. "Every half per cent reduction in interest rate costs SBI around Rs 550 crore of additional burden", he said.
On variable interest rates, he said: "We have already started a deposit scheme wherein fixed deposits of more than five years are offered 0.25 per cent more than the highest deposit rate. We are not hoping to attract diversion of deposits". Flexibility could be achieved only through controlling operational costs in the prevailing rigid interest rate structure, he added.
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Outlining the bank's strategy, he said SBI has planned to increase the share of personal banking out of the total portfolio to 20 per cent in the next three years, from 13.5 per cent as on March 31, 2001. On competition, he said that competition is localised only in urban areas and these are not the only areas for personal banking.
Ballabh said SBI Life, the joint venture between SBI and Cardiff, would break-even by the end of this financial year, adding that the credit card business has operated as per the original business plan. At present, SBI Life has 8 lakh active cardholders with plans to add another 3 lakh in the next five months.
Earlier, the SBI chairman announced a new modified One Time Settlement (OTS) scheme for small borrowers whose account have turned non- performing assets (NPAs). The OTS scheme will have an upper limit of Rs 1 crore.