State Bank of India is sitting on excess funds of around Rs 80,000 crore, an amount equivalent to what all banks put together borrow from the central bank, indicating it could lower lending rates further. Last week, the lender lowered the so-called base rate to 9.75 per cent from 10 per cent earlier. A basis point is 0.01 percentage point.
The bank's deposit growth has been double that of loans, allowing it to be liberal with lending rates to boost flagging demand for loans.
SBI chairman Pratip Chaudhuri said that the bank has seen robust growth in deposit mobilisation while demand for loans is lukewarm. He said, in the first five months of this fiscal year, the bank has seen a deposit growth of 8 per cent while advances have risen 4 per cent. On a year-on-year basis, deposits rose 22 per cent while advances grew 14 per cent.
The central bank has projected loan growth of 17 per cent and deposit growth of 16 per cent for the current fiscal year.
Chaudhuri indicated that the bank has started investing surplus money in commercial papers and certificate of deposits besides investing in government securities. He said the bank holds excess government securities to the tune of five percentage points than mandated by RBI. The central bank mandates banks to hold 23 per cent of their deposits in the form of Gilts.
In 2009, post-credit crisis period, excess liquidity to the tune of Rs 70,000 crore at SBI led to the former-chairman OP Bhatt launching fixed home loan rate of 8 per cent for the first year. The scheme, which was termed as teaser scheme, was disapproved by the Reserve Bank of India.
The current chairman Pratip Chaudhuri has lowered lending rates across the board by cutting base rate and prime lending rate by 25 basis points to 9.75 per cent and 14.50 per cent, respectively. Besides, the bank has lowered lending rates for home loans up to Rs 30 lakh to 10 per cent and for loans above Rs 30 lakh to 10.15 per cent.
Even as SBI lowered the lending rates, Chaudhuri said the bank will not disappoint its depositors. "We will not bring deposit rates below the post office savings rate of 8.5 per cent," he said. When asked if the bank could look at a further reduction in lending rates, SBI chief said: "Already our interest rates on loans are the lowest in the industry. Also, we have an obligation to our shareholders."
He said that total sacrifice due to cut in lending rates is Rs 1,250 crore. He indicated that despite the cut in the lending rate, the bank is maintaining a healthy net interest margin.
"NIMs are very robust at 3.94 per cent for the month ended August," he said. SBI's margin for the first quarter ended June 2012 stood at 3.2 per cent.
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