| SBI raises deposit rate by 25bps |
MUMBAI State Bank of India, the country’s largest lender, has raised its interest rate by 25 basis points to 9 per cent for three to five year tenor deposits of less than Rs150,000 ($26,900), the bank said in a statement on Saturday.
The increase is effective from July 1, the state-run lender said in the statement.
The move, which is likely to trim SBI’s profits, comes as a surprise because the bank had earlier this month cut deposit rates by 0.25 per cent in select maturities. This followed the Reserve Bank’s cut in lending rates by 0.5 per cent in April and a cumulative cut in cash reserve requirements to the tune of 1.25 per cent this year.
A hike in interest rate by SBI is surprising also because it followed a cut of 0.20 per cent in base rate by private lender HDFC Bank yesterday.
Bankers are of the opinion that lowering lending rates, which can help boost sagging growth as well as credit pick-up, is possible only if they are able to rein in deposit rates which continue to be elevated due to competition and slowdown in deposit growth.
Meanwhile, SBI’s peer Union Bank of India on Saturday announced a cut of up to 1 percentage point in its lending to micro, small and medium enterprises. Two other small banks — Deustche Bank and Lakshmi Vilas Bank— had also increased deposit rates marginally over the past week.
Krishna Kumar, managing director, State Bank of India, said that one of the key reasons the bank’s margins are on the higher side is the presence of a very substantial current account savings bank portfolio.
“As far as the savings bank portion goes, we have taken some steps recently, which we are expecting will probably also increase the current account portfolio. So that is certainly helping us maintain our lower cost of deposits, thereby enhance the overall net margins,” he said.
Talking about NPAs he said that there will ‘obviously’ be an increase in NPAs during the year. “I do not believe it is something that is unmanageable. We should be able to contain the growth quite effectively,” he added.
Agencies
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