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Pratip Chaudhuri in Mumbai on Tuesday. (PTI)
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Mumbai, July 31: The State Bank of India has indicated that it may lower its lending rates as the one percentage point cut in the statutory liquidity ratio will raise its commercial lending corpus by about Rs 10,000 crore.
SBI chairman Pratip Chaudhuri said the change in the reserve ratio would allow the country’s largest commercial bank to earn an annualised return of at least 10.5 per cent — about 300 basis points more than the 7.5 per cent average return from the investment in SLR bonds.
Other banks have shown no sign yet of taking a cue from the SBI.
Addressing reporters today, Chaudhuri said the SBI’s asset liability committee would meet in a day or two to decide whether to raise the base rate or just trim the interest rate spreads for select retail products.
SBI had not altered its base rate after the RBI brought down the repo rate by 50 basis points in April. It had, however, cut the spreads applicable to certain borrowers such as small and medium enterprises, but the relaxation wasn’t extended to retail borrowers.
Chanda Kochhar of ICICI Bank refused to say whether the private lender would pass on the benefit of the SLR cut to its customers. Kochhar said the SLR reduction would give banks more funds to lend to the productive sectors of the economy. She said the decision to bring down interest rates would depend on liquidity and the reduction in the bank’s cost of raising funds.
Some experts said the reduction would not have a great impact on lending rates as banks tend to park more money in the SLR bonds than they were required to. The average holding of SLR bonds within the banking system is 29 per cent against the current level of 24 per cent.
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