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State Bank of India on Thursday said it is not considering an increase in lending rates even though some private lenders have already taken the step.
“We are not (thinking of hiking lending rates) because we are witnessing a surge in deposits. We are getting a huge influx from liquid mutual funds. Last week, we got about Rs 10,000-15,000 crore of new money. We are sitting on a significant amount of extra cash,” said SBI Chairman Pratip Chaudhuri, on the sidelines of a customary luncheon hosted by Reserve Bank of India’s Governor D. Subbarao after the central bank’s board meet in Mumbai.
Private sector banks, such as HDFC Bank and YES Bank, have already hiked their base rates (rate below which banks cannot lend to borrowers), following RBI’s liquidity tightening measures last month.
These banks have also increased their deposit rates. Others, such as Axis Bank and Deutsche Bank, have hiked their deposit rates, generally seen as a precursor to a hike in lending rates.
According to the SBI chief, “The people who are borrowing in the wholesale market are challenged, but we are lending in the wholesale market. So, in a way, it is good for us. We are not seeing any pressure.”
“Further, our cost of funds remains at about 6.7 per cent. Even if we lend at base rate, we have a spread of 3 per cent,” Chaudhari added.
The RBI, last month, announced a series of liquidity tightening steps, including restricting banks’ overnight borrowings and sale of Government bonds, in order to stabilise the rupee.
As a result, rates in the call money market shot up, leading to some banks experiencing pressure in their cost of funds and margins, resulting in a hike in lending rates.
At present, SBI’s base rate is the lowest in the industry at 9.70 per cent.
beena.parmar@thehindu.co.in
Source: thehindubusinessline
“We are not (thinking of hiking lending rates) because we are witnessing a surge in deposits. We are getting a huge influx from liquid mutual funds. Last week, we got about Rs 10,000-15,000 crore of new money. We are sitting on a significant amount of extra cash,” said SBI Chairman Pratip Chaudhuri, on the sidelines of a customary luncheon hosted by Reserve Bank of India’s Governor D. Subbarao after the central bank’s board meet in Mumbai.
Private sector banks, such as HDFC Bank and YES Bank, have already hiked their base rates (rate below which banks cannot lend to borrowers), following RBI’s liquidity tightening measures last month.
These banks have also increased their deposit rates. Others, such as Axis Bank and Deutsche Bank, have hiked their deposit rates, generally seen as a precursor to a hike in lending rates.
According to the SBI chief, “The people who are borrowing in the wholesale market are challenged, but we are lending in the wholesale market. So, in a way, it is good for us. We are not seeing any pressure.”
“Further, our cost of funds remains at about 6.7 per cent. Even if we lend at base rate, we have a spread of 3 per cent,” Chaudhari added.
The RBI, last month, announced a series of liquidity tightening steps, including restricting banks’ overnight borrowings and sale of Government bonds, in order to stabilise the rupee.
As a result, rates in the call money market shot up, leading to some banks experiencing pressure in their cost of funds and margins, resulting in a hike in lending rates.
At present, SBI’s base rate is the lowest in the industry at 9.70 per cent.
beena.parmar@thehindu.co.in
Source: thehindubusinessline
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