State Bank of India, the country’s largest lender, is not likely to cut lending rates immediately, at least not before reducing deposit rates, a senior official of the bank said today.
“The (overall) effect of the measures taken by RBI will come with a lag. The cost of funds may not come down overnight,” the official said.
The bank is closely monitoring the situation. The Asset-Liability Committee of the bank met last night to review the situation where no decision was taken on interest rates. The panel will once again meet today or Friday, the official said.
Reserve Bank of India has reduced banks’ cash reserve ratio by 250 basis points in the last nine days to 6.5 per cent, including the 100-bps cut Wednesday, in a move to infuse liquidity in the cash-starved system.
State-owned Punjab National Bank reacted immediately to Wednesday’s RBI measures by announcing a cut in its home and car loan interest rates by 50 bps late Wednesday.
State Bank of India, however, is likely to watch the situation for some more time.
“It is too early to decide whether to cut lending rates. And before lending rates, it is deposit rates which has to be reduced,” the official said.
On October 1, SBI had introduced a new deposit scheme offering 10.5 per cent on 1,000-day deposits. Earlier, the bank was offering 9.50 per cent for deposits having a tenure of two years to less than three years.
At 1:36 pm, SBI shares were traded at Rs 15,230 on National Stock Exchange, up 2 per cent from Wednesday’s close.
