The State Bank of India, nation's largest lender, has expressed hope that the 90-basis points-reduction in the lending rates will prop up its sagging loan growth which will boost the loan book to 8-9 per cent for the current financial year.
The SBI had, yesterday, reduced its marginal cost based lending rate (MCLR) by 90 basis points or 0.9 per cent across various maturities.
"The loan growth target we had given earlier was of 11-12 per cent. As of now it is only 6.7-6.8 per cent after the contraction in November and December. With this rate cut, we are hoping that we would be able to take it to 8-9 per cent," SBI chairperson Arundhati Bhattacharya told reporters today.
Bhattacharya, however, said since there are three more months left for the year to close and in the next month or so loan growth numbers would be clearer.
In the steepest cut in recent years, SBI has reduced the one-year MCLR to 8 per cent from 8.90 per cent and three year rates to 8.15 per cent from 9.05 per cent. Accordingly, the overnight MCLR rate has been slashed to 7.75 per cent from 8.65 per cent.
The move by India’s largest bank is one of the steepest cuts in loan rates since the global economic crisis in 2008.
The decision by the SBI came a day after Prime Minister Narendra Modi asked banks to priorities lending towards poor and lower middle class.
Bhattacharya was quick to clarify that it is not a teaser loan which was frowned up on by the regulator in the past and then asked to discontinue.
She said between November 10 and December 30, the bank collected an incremental net deposit of Rs 1.65 trillion which pushed up its Casa accounts by a whopping 478 bps and she does not think these deposits are temporary.
"I think these deposits are pretty durable in the sense that we have not cut deposit rates, this is a liquidity driven rate cut which is unprecedented," she said, adding the bank is sitting on an excess liquidity of Rs 1.40 trillion, on average after peaking at Rs 1.65 trillion from some time during the note-ban.
Bhattacharya said so far the deposits which have come into the system have not flown out but she believes that quite a bit of it will flow out.
"When that happens we will need to look at deposit rates to see how we can maintain the rates where we have got them. We believe that it can be done and that is the reason we have gone ahead and done this (rate cut)," Bhattacharya noted.
"We also wish to give a clear signal that we are open for business that there is demand in the economy and definitely we would like to see higher credit growth," she said, adding however that she does not think interest rate is sole tool for credit growth.
On boosting affordable housing sector, Bhattacharya said SBI will be talking to builders to see what best can be done to boost the real estate sector.
"I don't believe that cut in interest is the only thing to boost demand or growth. Various other steps will need to be taken. We will be talking to builders on what more we can do," she said.
The bank is also launching three more new products to boost it home loan growth.
It is launching SBI Bridge-Loans, Insta Home Top-up Loans as also a product for non-salaried customers.
Interest rate for the Bridge-loan will be 10.45 per cent for the first year and 11.45 per cent in the second year, while the Insta Home Top-up Loan is priced at 9 per cent.
Managing director for national banking group Rajnish Kumar said out of the 49,000 ATMs of SBI Group, 40,000-41,000 machines are dispensing cash currently.
Bhattacharya also hinted that the mega merger of its five associate banks and Bharatiya Mahila Bank (BMB) could be pushed to the next financial year as it is still awaiting the government notification on the move.
"Probably, by a quarter or so (the merger could be delayed). The reason is we still have to get the government approval and even if we get it now, doing things like merger in the last quarter is never a very wise thing because there would be lot of IT system changes," she told reporters when asked whether the merger could be delayed due to the disruptions caused by the demonetisation drive.
(With PTI inputs)