SBI to review lending rates post policy

The country's largest bank, State Bank of India (SBI), has decided to wait till the July 25 review of monetary policy by the Reserve Bank of India (RBI) for a revision in lending rates.

SBI and all the other government-owned banks had raised their prime lending rates with effect from May 1, 2006 by an identical 25 basis points.

SBI, which accounts for about 20 per cent of the credit disbursed by the banking sector, witnessed a flat growth in advances during April-May 2006.

"This is a normal phenomena in the early part of a financial year. We have seen a pick-up in credit in June and the momentum is likely to continue for the rest of the year," said T S Bhattacharya, acting chairman of SBI. He was talking to reporters after the bank's annual general meeting.

SBI expects credit growth in 2006-07 to be around 25 per cent, which is above RBI's forecast of 20 per cent. SBI has seen a growth in retail deposits during April-May 2006.

Bhattacharya said the bank has approached the government seeking permission to go ahead with a share split. On the issue of raising capital through issue of fresh equity, he said a decision on this will depend on what the government has to say.

Dwelling on SBI's preparedness for implementing Basel II, Bhattacharya said the bank will need to allocate Rs 2,500 crore of capital for operational risk.

The RBI has decided to implement the Basel II norms, which provide for sophisticated capital allocation methodologies for credit risk, market risk and also operational risk, with effect from March 31, 2007.

The Basel II guidelines are still in the draft form. The central bank has also not made is clear whether the Basel II norms will be applicable from 2006-07 or 2007-08.