Interest rate cut likely in 2-3 weeks: SBI

Other banks may also pick up lead from SBI and cut rates ahead of the festive season

State Bank of India (SBI) Chairman Pratip Chaudhuri today indicated the country’s largest bank might cut interest rates this month to spur demand in housing and other consumer loans.

“We had an Asset Liability Committee meeting (ALCO) meeting and there we did not cut the rates, but I’m not ruling that out. It could happen in the next two to three weeks. We will see how the loan growth picks up,” he said on the sidelines of the World Economic Forum.

As SBI is the market leader other banks may also pick lead from it and reduce rates in the festival season. This is despite the Reserve Bank of India maintaining status quo in its latest monetary policy review. Finance Minister P Chidambaram has asked banks to reduce the burden on consumers and is likely to reiterate the message when he meets bankers next week.

“We are seeing a very strong co-relation as you drop the rates, the loan demand picks up very strongly. In fact, we would not be surprised if in this year our home loan grows by 30%… We are surplus in liquidity of about Rs 60,000-70,000 crore, so rate cut could be a possibility,” he said.

Asked about the bank’s debt raising plans, Chaudhuri said if there is any debt raising it could be in the overseas markets.

“MTM could be the route because we have an enabling resolution for $10 billion and out of that we have used around $4.6-4.7 billion. So there is enough room,” he said.  

Interest rate cut likely in 2-3 weeks: SBI