Mumbai, Oct. 8: The State Bank of India (SBI) is unlikely to cut its home loan rates in response to the liquidity-easing measures announced by the Reserve Bank of India on Monday.
However, the country’s largest bank is planning to lower interest rates in select segments such as automobile and consumer durable loans.
In her first interaction with reporters after taking over as chairperson of the 207-year-old state-owned bank, Arundhati Bhattacharya said SBI did not intend to revise its benchmark lending rate despite the RBI’s steps to ease liquidity.
On Monday, the central bank brought down the marginal standing facility (MSF) by 50 basis points to 9.50 per cent and announced “term repos” with 7-day and 14-day tenures.
The MSF is the window of last resort that banks borrow from when they face an acute cash crunch. The MSF rate is currently 150 basis points higher than the repo, which is the sole policy-signalling rate.
The repo is the rate at which the RBI provides short-term funds to banks against government securities. It now stands at 7.50 per cent.
While the decision to bring in repos of 7-day and 14-day tenures is expected to infuse liquidity of around Rs 20,000 crore into the banking system every Friday, the reduction of MSF will bring down the cost of funds to lenders.
Bhattacharya said the reduction in the MSF rate would not have an impact on interest rates since the bank did not depend on wholesale borrowing.
It largely borrows money from the retail segment where the impact of the rate cut will not be immediately felt.
Bhattacharya said that when the central bank raised the MSF rate in July by 200 basis points as part of its measures to control volatility in the forex markets, the SBI did not raise its interest rates. So when the MSF rate is cut, there is “no question” of bringing down interest rates on loans.
Incidentally, the SBI had raised its base rate on September 19 by 10 basis points to 9.80 per cent. The bank’s interest rates on a variety of loans are linked to the base rate. The increase meant that borrowers of home and car loans would have to pay higher equated monthly instalments (EMIs) on their loans.
The PSU bank had also raised the spreads on auto and home loans by as much as 0.20 per cent. The interest rate on housing loans up to Rs 30 lakh also went up to 10.10 per cent against 9.95 per cent earlier, while interest rates on auto loans rose to 10.75 per cent.
SBI managing director A. Krishna Kumar said interest rates on home loans offered by the SBI were among the lowest.
However, there could be some good news for individuals in certain categories such as auto and consumer durable loans where the SBI is planning to bring down the rates.
Last week, the finance ministry announced that the government would infuse additional capital in PSU banks so that they could on-lend to selected sectors such as consumer durables and two-wheelers at lower rates.
Krishna Kumar said the bank would shortly announce cuts in interest rates on select retail products.
However, a couple of PSU banks today took the lead by announcing lower interest rates ahead of the festival season. Punjab National Bank (PNB) decided to bring down its interest rates on car loans, two-wheelers, consumer durables and personal loans by at least one percentage point. The festival offer will last up to January 31. Oriental Bank of Commerce also reduced interest rates on select retail lending products.
Bhattacharya said the top priority on her agenda during her three-year tenure would be to keep bad loans under check. Efforts would also be made to leverage IT-driven solutions to address various issues confronting the bank that includes asset quality.
“There is no doubt in our mind that NPAs (non-performing assets) remain the top priority. It will remain a top priority...(as long as) we see the stress being around. I think nobody can say the war is over. If anything, we are going to make the intensity much, much more serious… To that extent, we have to ensure that whatever is done, we do it better and also we use a lot of other weapons to control NPAs,” she said.
The SBI’s gross non-performing assets rose to 5.56 per cent, which is among the highest in the banking system in the June quarter.
Bhattacharya said none of the associate banks would merge with the SBI in the current fiscal. However, some steps will be initiated in this respect. Already two of the seven associate banks have been merged with the SBI.
She added that the SBI would proceed with a merger only after obtaining clarity with respect to the capital that the Centre planned to infuse in the bank.