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Lending rates can be cut when credit picks up: SBI

If the deposit rates are very high, it is difficult for banks to lower lending rates, the SBI chairman added.

Arundhati Bhattacharya, Chairman, SBI

State Bank of India  chief Arundhati Bhattacharya today said the cut in lending rates can only happen when credit picks up.

“What the banks are waiting for is a little bit more of a sign of a credit pick-up. Whatever we say, when we cut the lending rates our income comes down and we need some other ways of making up that income to keep paying interest on deposits. That can always happen if the credit growth is quite robust and volume picks up.

“But when the volumes are very thin and if you are not seeing that kind of a clear pipeline, then it is very difficult to cut lending rates. So, I think most of us are waiting to see a little bit more of a pick-up in credit,” Bhattacharya told reporters on the sidelines of the bank launching the country’s first economic indicator, SBI Composite Index today.

The credit growth is slowly inching up and is definitely better than the growth up to September, she said. “Retail growth is alright. On the corporate side also we are seeing a little bit growth now, though new projects are still a challenge,” she said.

If the deposit rates are very high, it is difficult for banks to lower lending rates, the SBI chairman added.

In the second quarter SBI slashed deposit rates thrice, followed by reductions in October and November. Last week some other lenders such as HDFC Bank , ICICI Bank  and IDBI Bank  also reduced deposit rates.

“The fact that we are adjusting on the deposit taking side means that going forward all of us are seeing a rate cut. But exactly when it will happen is not something I can really tell you now,” Bhattacharya said.

During the December 2 policy announcement, the Reserve Bank left key rates unchanged, while in the past 15 months it has increased rates by 75 bps to 8 percent.

SBI stock price

On December 09, 2014, State Bank of India closed at Rs 306.70, down Rs 6.55, or 2.09 percent. The 52-week high of the share was Rs 2977.85 and the 52-week low was Rs 291.05.


The company’s trailing 12-month (TTM) EPS was at Rs 15.70 per share as per the quarter ended September 2014. The stock’s price-to-earnings (P/E) ratio was 19.54. The latest book value of the company is Rs 158.43 per share. At current value, the price-to-book value of the company is 1.94.

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