SBI may not cut lending rates soon

Mon Apr 23, 2012 9:39pm IST

1 of 2. People walk in front of a signboard displayed at the head office of State Bank of India in Mumbai November 9, 2009.

Credit: Reuters/Arko Datta/Files

Stocks

   

REUTERS - State Bank of India, the country's biggest lender, may not cut lending rates in the near term as costs of deposits continue to be high, Chairman Pratip Chaudhuri said on Monday, after the bank lowered its deposit rates.

Scores of private and state-owned banks, saddled with high-cost long-term deposits, narrow profit margins and the threat from a rising volume of bad debts, are hard-pressed to follow the Reserve Bank of India with a cut in lending rates.

Banks had not passed on the benefit of a reduction in their reserve requirements as tight cash conditions were keeping deposit rates high.

The Reserve Bank of India has lowered banks' cash reserve ratio (CRR), the share of deposits they maintain with it, by 125 basis point since January, releasing 800 billion rupees into the banking system.

Following the muted response from banks to its CRR easing, the RBI cut its policy interest rate by a deeper-than-expected 50 basis point last week, in part to spur faster monetary policy transmission and to give a stronger signal to banks.

"Repo rate cut has a signal impact. In terms of cost, it is not as significant as compared to CRR," SBI Chairman Pratip Chaudhuri told CNBC TV18.

"Repo rate does not have an impact on bottomlines. Transmission effect of CRR is what we are now rolling out because March was a very challenging quarter in terms of liquidity."

India's biggest private lender ICICI Bank (ICBK.NS), No. 2 state-run lender Punjab National Bank (PNBK.NS), IDBI Bank (IDBI.NS) were among the first to announce rate cuts, following the central bank.

The Economic Times newspaper had reported last week the government had ordered state-controlled banks to lower lending rates immediately. Bankers confirmed the order to Reuters.

(Reporting by Swati Pandey in MUMBAI; Editing by Aradhana Aravindan)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Consumer Confidence Index

REUTERS SHOWCASE

Deal Talk

Deal Talk

Exclusive - Lupin, U.S. firms weigh bids for GSK's mature drugs: sources  Full Article 

Classifying Banks

Classifying Banks

RBI to start announcing too-big-to-fail banks in Aug 2015  Full Article 

Corruption Probe

Corruption Probe

India to probe corruption in healthcare after TV sting.  Full Article 

Food Scandal

Food Scandal

Starbucks, Burger King dragged in as China food scandal spreads.  Full Article 

Bigger iPhones

Bigger iPhones

Apple asks suppliers to produce up to 80 mln large-screen iPhones - WSJ.  Full Article 

Bali Trade Deal

Bali Trade Deal

India keeps world guessing in countdown to landmark trade pact deadline.  Full Article 

Bangalore Sex Abuse

Bangalore Sex Abuse

Modi's BJP puts political twist on local sex abuse case   Full Article 

Yahoo to buy Flurry

Yahoo to buy Flurry

Yahoo to buy analytics startup Flurry to bolster mobile ad business.  Full Article 

Wholesale Biz

Wholesale Biz

Wal-Mart adds $102.9 million in Indian wholesale business in June.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage