The Telegraph
Since 1st March, 1999
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SBI hints at lower rates

New Delhi, Oct. 29: The chief of the country’s largest commercial bank, State Bank of India, today hinted the bank may lower interest rates on advances for property and consumer durable purchases.

“In view of the soft interest rate regime, further rate cuts cannot be ruled out for home and consumer loans,” SBI chairman A.K. Purwar told reporters. “If rates are cut the bank would have a relook on the interest rates that are offered,” he said.

The Reserve Bank of India (RBI), the country’s central bank, is in favour of a soft-rate bias and has already cut its repo rate — a benchmark for short-term money market rates — twice in the current financial year to 4.5 per cent.

“I favour a stable and soft interest rate bias but it is for RBI to decide. Let us wait till November,” he said.

Purwar said interest rates have also headed south due to competition.

“But I think the interest rates on retail loan sector should be less as the non-performing assest (NPA) level in the sector is at 2 per cent. Retail loans are secured and recovery level is high,” he said.

State Bank of India’s loan portfolio has grown to nearly Rs 2,100 crore in the first six months of the current financial year from Rs 1,500 crore at the end of the past financial year.

However, Purwar said the bank would not try to match its interest rate offered on housing loans with ABN Amro. Last week, ABN had said it would offer 6.0 per cent rate in the first year, 6.5 per cent in the second year and prevailing floating rate from the third year onwards.

He also said as part of an internal restructuring, SBI would wind up its sick housing finance arm and also offload equity in its wholly-owned mutual fund business to a strategic partner.

SBI’s net profit grew by 27.7 per cent to Rs 3,105 crore in th last financial year while assets inched up 8.0 per cent to Rs 3,75,876 crore. The bank’s advances stood at Rs 1,37,758 crore last fiscal.

Purwar said he expects the bank’s advances to rise by over 16 per cent but it would be difficult to achieve a 18 per cent growth in deposits.

“It might be difficult for us to retain 30-35 per cent of the $4.2 billion through Resurgent India Bonds proceeds. We have collected over Rs 2,000 crore in NRI deposits till last week,” he said.

SBI raised the money on behalf of the government from expat Indians to shore up the country’s external finances after the US and other developed countries slapped economic sanctions against the country in retaliation for carrying out nuclear tests.

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