MUMBAI: India’s largest public sector lender State Bank of India (SBI) on Tuesday said that it would consider cutting lending rates if there is a strong pick up in credit growth. According to the bank’s chairman, Arundhati Bhattacharya, SBI’s decision to cut its key lending rates would not depend upon a rate cut by the Reserve Bank of India as the the State Bank is not borrowing much from the RBI’s repo window.
“A 25 to 50 basis point reduction in repo rate would not have much impact on our cost of funds. We will have to take a call on slashing lending rates as and when there is a clear signal about a pick up in the credit growth,” she said while announcing the launch of the SBI Comp-osite Index, which will track the manufacturing activity in the country. Last week, the State Bank of India slashed its retail deposit rates for maturities of over one year by 0.25 per cent.
“When we first slashed our deposit rates in October this year, we were not backed up by other banks. But recently some of the private sector banks also lowered their deposit rates. So all of us are seeing the possibility of a rate cut in the coming days,” she said. If there is a rate cut now, the SBI chief said that the bank’s income would come down. “So when the credit growth volume is thin, it is difficult to cut rates. We need to see a real pick up in credit growth,” she added.
