State Bank of India (SBI) is planning to slash lending rates even before the Reserve Bank of India (RBI) cuts its policy rates in the current cycle, mostly in a bid to beat the sagging credit growth.SBI is keen to cut interest (lending) rates in order to boost credit expansion, Diwakar Gupta, chief financial officer (CFO) of the bank told reporters on the sidelines of the International Research Conference organised by RBI. However, he did not indicate any timeline for the move.
The credit growth which was over 22 per cent year-on year (YoY or compared to the same time last year) in the initial months of 2011-12, tapered off to around 16 per cent YoY by December-end, making RBI to slash the credit growth projection of for the fiscal to 16 per cent last week.
SBI is the largest lender in the country, cornering about 25 per cent of the total banking business in India. It is yet to announce its results for the quarter ended December 2011, in which it announces credit and deposit growth rates.
RBI stopped short of cutting policy rates in its third quarter review of monetary policy on January 24, but slashed Cash Reserve Ratio (CRR or a portion of the deposits banks have to keep with RBI) by 0.5 per cent to 5.5 per cent, thus, signalling the reversal of policy rate hike cycle. The move added `32,000 crore of funds to the lendable resources of the banking industry as a whole.
RBI had hiked policy rates - repo (at which RBI lends to banks) and reverse repo (at which RBI pays on deposits of banks with it) - 13 times in 20 months since March 2010, in its all holds barred fight against spiralling inflation.
