Hyderabad, June 21: The State Bank of India will review its rates this week, while it signalled a drop in credit growth because of higher interest rates and inflationary pressures.

The asset liability committee of the bank will meet this week to decide on realigning the bank rate and deposit rates, chairman Pratip Chaudhuri said today.

The RBI’s move to raise the short-term lending rate, or repo rate, by 25 basis points to 7.5 per cent in the mid-quarter review has led banks to rethink their rates.

Chaudhuri said the bank’s credit growth might be 16-19 per cent this fiscal, lower than earlier estimates, mainly because high interest rates have led to a slowdown in demand for long-term equipment finance.

“We estimate (credit demand) to be between 16-19 per cent. Earlier, our estimates were between 19-22 per cent. But, with interest rates going up many corporate houses are reconsidering their plans for expansion,” Chaudhuri said.

“Therefore, we expect some slowdown in demand for credit, particularly in long term and term credit for equipment finance,” he said.

However, the growth in retail loans, which is pegged at 25 per cent of the total portfolio, may remain as estimated, Chaudhuri said.

On the bank’s net interest margins (NIM), he said it was expected to be 3.5 per cent, against 3.35 per cent in the last fiscal.

Chaudhuri said, “The growth is expected because of the increase in our base rate from 8.5 per cent to 9.25 per cent. Second, the home loans that were given at 8 per cent in the first year and 9.25 per cent in the second year have been discontinued.

“Moreover, corporate houses are also accepting higher rates of interest. So, the initial trends of NIM are very positive.”

The bank has adopted some strategies to reduce its non-performing assets, which stood at 1.63 per cent as of March 31.

“Our objective would be to bring it down at least by 25 basis points in the current fiscal,” Chaudhuri said.

The SBI had made an extra provisioning of Rs 550 crore, which is 2 per cent of the total loan portfolio in the first quarter of this fiscal.