Limited scope for further cut in interest rates: SBI Chief Rajnish Kumar

On the matter of cutting interest rates, state-run State Bank of India (SBI) on Thursday indicated there is limited space for further easing of its lending rate.

"If you look at the bond yields, they have gone up in the recent past. So, I think there is limited headroom available for cutting down the interest rates, both deposit and lending," SBI Chairman Rajnish Kumar told reporters on the sidelines of the Bharatiya Yuva Shakti Trust's (BYST) silver jubilee celebrations organised by industry chamber CII.

"Deposit rate unless you cut, you cannot cut lending rate. For time being we are in for much more stable interest rate," he said.

The SBI, last week, reduced its lending rate for home and auto loans by 0.05 percentage points.

Kumar also said it was "quite possible" that there may be 10-15 basis points hike in the interest rate, following the issuance of recapitalisation bonds leading to an increase in yields.

In a stimulus package aimed to boost flagging economic growth, create jobs and increase credit flow, the cabinet last month approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks and massive road infrastructure investment of nearly Rs 7 lakh crore over five years.

Of the support to banks, Rs 1.35 lakh crore will be raised through recapitalisation bonds and the remaining sum through budgetary support and market borrowings.

Announcing the package here, Finance Minister Arun Jaitley said the details of the reform measures for the public sector banks would be unveiled at a later date.

Chief Economic Advisor Arvind Subranmanian clarified that the recapitalisation bonds would count as debt, while their exact nature would be made available in due course.