 "Arundhati Bhattacharya")
Borrowing through MSF is costly as RBI charges 9.75 per cent for overnight funds against 7.5 per cent at the liquidity adjustment facility (LAF). Plus, the bank has recently raised interest rates on term deposits and bulk deposits to attract funds. It had raised deposit rates by 100 basis points in some short-term buckets and 25 basis points for those beyond one year.
The combined effect of these steps would mean a rise in the cost of funds in September.
Arundhati Bhattacharya, its managing director and chief financial officer, said: "The bank has sufficient surplus funds and we have approached the MSF window, only because RBI has put a cap on borrowing at LAF."
She, however, did not elaborate on the frequency and extent of borrowing at LAF window.
The cost of funds will be higher in September, said another senior SBI official. Its cost of funds at the end of June 2013 was 6.42 per cent, down from 6.46 per cent at the end of March 2013.
The excess liquidity at SBI had come down sharply from Rs 50,000 crore to Rs 15,000 crore. In a high short interest rate environment, corporations have moved away from the commercial paper market to bank credit. Plus, companies used limits for advance tax payments. This has pushed the credit growth.
SBI's credit growth till August 2013 was 22 per cent, while the deposit growth was around 14 per cent. After the interest rate revision, the bank expects to see improvement in deposit mobilisation, said its managing director (national banking) A Krishna Kumar.
Giving rationale for deposit rate hike, SBI Chairman Pratip Chaudhuri had last week said the bank needed resources to fund that huge growth. After RBI steps (referring to measures to squeeze liquidity) deposit rates have gone up.
"Unless bank does not raise interest rates, we would have faced loss of deposits. Bank does not wait for that to happen" Chaudhuri had said.
