Mumbai, August 2: State Bank of India (SBI) on Thursday reduced interest rates for deposits with a term of more than five years to 8.5%, effective August 7. The bank currently offers 8.75% for deposits of up to Rs. 1 crore and 9% for deposits above Rs. 1 crore in this basket. “This is purely an asset-liability mismatch decision,” said SBI Deputy Managing Director and Chief Credit Risk Officer Atanu Sen. “Honestly speaking, we found that the portion of depositors in this basket is quite small. We have not touched other maturity baskets.”
SBI’s selective deposit rate cut comes a day after the country’s largest lender reduced its home and auto loan rates, citing extra liquidity support through the Reserve Bank of India’s decision to pare banks’ mandatory bond holding limit to 23% of total deposits from 24% earlier. The bond holding limit is called the Statutory Liquidity Ratio (SLR). SBI said the SLR cut gives it additional liquidity of about Rs. 10,000 crore and the management had decided to pass this on to customers and expand the balance sheet.
SBI reduced home loan rates from 10.75% to 10.25% for loans up to Rs. 30 lakh while loans above that will be offered at 10.40%. Auto loan rates were reduced from 11.25% to 10.75%.
While the reduced rates are for new customers, existing borrowers can switch to them by paying 1% of the outstanding loan amount to the bank as fees. It said this was not an early payment penalty. “Cost is a factor of time,” said P. Pradeep Kumar, deputy managing director and group executive for global markets at the bank. “We are offering the new rates now based on the existing cost. Even then, our rates are the most competitive in the industry.”
PTI reports: The bank said that sluggish growth in the property market prompted it to cut its annual home loan growth target. The bank, which cut its home loan rates on Wednesday, was earlier targeting a 25 per cent growth in its home loan book. Such loans are expected to grow by only 15-20 per cent, the bank said. “There has been a drop in home registrations and we want to be realistic and now expect that the home loan segment will grow by only 15-20 per cent,” Mr. Atanu Sen, Deputy Managing Director said, while addressing a press conference.
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